MONTPELIER – Gov. James Douglas vetoed a bill Friday that would have required the owner of the Vermont Yankee nuclear power plant to make financial guarantees that it has the money to shut down and clean up the site.

Douglas, who vetoed a similar bill passed by the Vermont Legislature last year, wrote in his four-page veto message that if this proposal was enacted, the state would likely be sued for breach of contract and electrical rates for residents would rise.

"Because this legislation threatens ratepayers, increases long-term electric rates, risks potential job losses, and creates unnecessary liability for the state – while failing to adopt a viable, workable solution – I cannot support this legislation and must return it without my signature," Douglas wrote.

The decommissioning bill was one of the major pieces of legislation passed by lawmakers during the 2009 session, as Democrats vowed to hold Entergy Vermont Yankee, the owner of the Vernon power plant, responsible for the eventual cleanup of the site.

Entergy's fund to shut down the facility and return the site to a green field is hundreds of millions of dollars short of the more than $900 million decommissioning is expected to cost. Over the last year, the fund has lost money as Wall Street slumped.

The company countered that the proposal runs afoul of a 2002 agreement between it and state regulators that Entergy would use the so-called SAFSTOR method of cleaning up the facility – essentially mothballing the site and waiting years or decades as the radioactive material cooled down and the fund built up the necessary money.

Larry Smith, a spokesperson for Entergy Vermont Yankee, said Friday afternoon that the company "applauds the governor's action as a win-win for electrical consumers." He said the 2002 agreement with the state – along with federal law – requires the owners of nuclear power plants to fund their decommissioning.

"It is unthinkable that the Legislature would want consumers to pay more for their electricity in these economic times," Smith said.

Lawmakers and advocates who supported the bill had different reactions to the governor's veto Friday.

Rep. Tony Klein, a Democrat from East Montpelier and chairman of the House Natural Resources and Energy Committee, said Douglas does not appear to understand the full scope of the problems with the decommissioning fund or what his bill would do.

Klein said the bill would not interfere with the 2002 agreement with the state because it would only hold Entergy immediately responsible for the funds under two scenarios – a sale and a 2012 shutdown. Both of those are outside the scope of the current agreement, he said.

"I'm really saddened by his decision today," Klein said. "It's clear he is putting the interests of a Louisiana company ahead of the interests of Vermonters, who will be on the hook for paying to shut down Vermont Yankee if Entergy is out of money."

James Moore, the clean energy advocate for the Vermont Public Interest Research Group, which supported the bill, agreed with Klein's assessment, adding that Douglas is "either wrong about the facts or intentionally misleading Vermonters."

Moore pointed out that an expert with the Vermont Department of Public Service testified earlier this year before the Vermont Public Service Board that Entergy should be required to better fund its decommissioning.

"I don't think he understands the bill he just vetoed," Moore said. "Without this, Vermonters could be left responsible for cleaning up Entergy's mess."

David Lamont, the director of regulated utility planning for the department, told the Board in the relicensing case in late April that Entergy should be required to continue paying into the decommissioning fund – or at least have financial guarantees in place, according to a transcript.

"The only way to be 100 percent assured that Entergy will bear the full costs of decommissioning is to have an assurance from the parent company that it will cover any shortfall in the fund," Lamont testified.

In rebuttal testimony filed before the Board this year, Entergy Vice President Jay Thayer said Lamont's suggestion is unnecessary.

"While Entergy VY will continue to monitor the market value of the decommissioning trust funds, we do not believe that it is necessary at this time to decide that Entergy VY should begin making contributions to the decommissioning trust fund in 2012," Thayer wrote.

Last year's decommissioning bill required Entergy to fully fund the cleanup process. This year's bill took a step back and – after a compromise was struck between the House and the Senate – only required the company to make a financial guarantee that the funds would be available.

The provision would only kick in if Entergy went forward with a plan to sell the Vernon plant to a spin-off company or if the plant shut down in early 2012 when its operating license expires. Entergy hopes to run the plant for another 20 years beyond that date.

Douglas' veto message makes it clear that several factors went into his decision, including the fear that Entergy would sue Vermont. Other factors include the more than 600 jobs at the facility and the worry that forcing the company to pay for decommissioning sooner rather than later would result in much higher electricity rates for Vermonters.

"H.436 does not achieve a greater level of accountability for Entergy," Douglas wrote. "Rather, it is the original sale, the [Nuclear Regulatory Commission], and the current case on continued operation now before the [Public Service Board] that are the means to achieve accountability."

Klein said he is unsure if lawmakers will attempt to override Douglas' veto during a special session on the 2010 budget scheduled for early June. But lawmakers are slated to vote next year on the issue of continued relicensing.

"And if we vote next year that the plant should not be allowed to operate beyond 2012, you can bet that we'll also have a bill requiring them to fund decommissioning," he said.

daniel.barlow@rutlandherald.com