Rep. Tony Klein, the chair of the House Natural Resources and Energy Committee, says the planned sale of Central Vermont Public Service to Fortis, Inc., Canada’s largest investor-owned utility, calls into question the governance structure of VELCO, Vermont’s electric transmission utility.
Klein said he wants the Vermont Public Service Board to restructure the VELCO, Vermont’s electric transmission utility. He would like to see each utility have an equal say on the VELCO governing board; he proposes a one vote, one utility governance structure.
“I would like to see the PSB restructure the governance of VELCO away from the bigger you are the more control you have, to having it be more equitable,” Klein said. “Right now as it stands, two companies owned by foreign ownership will be the controlling decisionmakers of VELCO. It was one thing when these companies were owned by Vermonters; it’s another thing when they’re owned by foreign nationals.”
Vermont Transco, LLC, and Vermont Electric Power Company, which are together known as VELCO, owns 660 miles of high voltage transmission lines in Vermont. The state’s 20 utilities, including three investor-owned utilities, two cooperatives and 17 municipal electric departments, hold a stake in VELCO and its governance based on the percentage of ratepayers each utility serves. CVPS, Vermont’s largest electric utility, provides power to 40 percent of the ratepayers in the state; Green Mountain Power distributes electricity to 30 percent of Vermont households; and Vermont Electric Co-op holds 10 percent of the market.
Green Mountain Power is owned by Montreal-based Gaz Metro. If the CVPS deal with Fortis, which was announced on Memorial Day, goes through, the two Canadian companies would have a 70 percent ownership share of VELCO.
Klein said it’s important for VELCO governance and decision making to be more open to public scrutiny “because the decisions that are made by our largest utilities and VELCO affect all the ratepayers of Vermont.”
The utilities that own VELCO are guaranteed a rate of return of 12 percent to 14 percent, according to Klein.
“I’m not convinced 100 percent that those decisions are always made with the ratepayer in mind since there’s a lot of money to be made,” Klein said. “I think that concern grows a little larger now that our two biggest utilities and utilities with controlling votes are owned by foreign ownership.”
Officials from VELCO, CVPS, Fortis and Vermont Electric Co-op said Canadian ownership would not change the way the transmission utility currently operates.
Kerrick Johnson, vice president of external affairs for VELCO, said: “Regardless of what happens, Vermont utilities have a well-established process for collaboration … and we expect that to continue.”
David Hallquist, CEO of Vermont Electric Co-op, said he’s not sure the state has jurisdiction over VELCO and its governance structure. The governance structure, he said, is negotiated between utilities and it would be difficult to change.
“I’m not sure state regulators could say anything about it,” Hallquist said. “It’s federally regulated. I’m not sure the state has jurisdiction.”
Stan Marshall, CEO of Fortis, said in an interview that the VELCO interest wasn’t a particular attraction for his company. “There was nothing strategic about it beyond the rest of the assets,” Marshall said.
Klein said he is concerned that the Canadian companies would try to export power from Hydro-Quebec and other sources to cities in the Northeast by building transmission lines through Vermont.
Barry Bernstein, president of the Washington Electric Co-op, is also worried about the potential for Canadian companies to build a high voltage line through the state. “What is going to stop VELCO if it decides to pass through Canadian power to serve the big cities down south?” Bernstein asked in an interview. “We may want that but the decision should be based on what Vermonters want, not what power structure wants.”
“To me it also highlights the fact that I think it would be hard for us to argue that electricity is anything but a necessity almost as much important as water to drink or air to breathe,” Klein said. “I have always questioned … the amount of money what these investor-owned utilities are making and paying their investors and employees at expense of Vermont ratepayers.”
Marshall said Fortis has no such plans.
Klein suggested that the most expensive areas of the state to maintain are served by the municipal electric departments. “If we had one co-op or one utility, everybody’s rates would be less than CVPS and GMP’s right now,” Klein said.
If Fortis’ purchase of CVPS is approved by shareholders and Vermont regulators, the deal with will give the company a second toehold in the United States.
Fortis operates primarily within Canada, Belize, Grand Cayman, and Turks and Caicos Islands. The company has holdings in a non-regulated hydro-electric project in Upstate New York operated through Fortis’ U.S. subsidiary, FortisUS Energy Corporation.
Founded in 1987, Fortis had about 6,800 employees and $12.9 billion in assets as of December 2010, making it the largest investor-owned utilities company in Canada. Besides holding ownership in various utilities companies, Fortis owns hotels and commercial real estate in Canada.
Fortis’ central offices in St. John, Newfoundland, employ 17 workers on site. Lawrence Reilly, CEO of CVPS, told Jane Lindholm on Vermont Edition recently that he had been assured that Fortis had a very de-centralized management strategy which would allow CVPS to maintain its current management philosophies with increased financial backing from Fortis.
Fortis’ environmental practices in Belize have been called into question. The company developed a hydro dam there that critics say has caused the flooding of a rich ecosystem; they claim the dam has a detrimental effect on the quality of the water downstream and caused fish die-offs.
The company’s officers are David G. Norris, chairman; Stan Marshall, President and C.E.O.; Barry V. Perry, CFO; and Ronald W. McCabe, general counsel and secretary. Marshall has been serving since January 1996 and is overseeing its five year, $5 billion growth plan.
Marshall, 60, made roughly $2.8 million in U.S. dollars in 2009.
Taylor Dobbs contributed to this story. Bob Zeliff, a VTDigger.org reader, also contributed online research via Tipster, VTDigger.org’s newsgathering platform for readers and reporters.
