Rep. Tony Klein. VTD/Josh Larkin
The Vermont Department of Public Service is conducting a study to determine whether the consolidation of Vermont’s 20 electric utilities will save ratepayers money. The review is slated for completion on Dec. 31.
Rep. Tony Klein, D-East Montpelier, chair of the House Energy and Natural Resources Committee, requested the study in April, according to a memo obtained from the department.
Read the memo. Rep. Tony Klein’s request; DPS response
The state has 20 utilities ranging in size from Central Vermont Public Service, the state’s largest power provider, to Vermont Electric Co-operative, which serves 10 percent of ratepayers, to 15 village and town power departments sprinkled across the state. The municipal electric entities were formed by the Rural Electrification Administration in the 1940s and 1950s.
In the letter sent, dated April 26, Klein asked the DPS to examine whether consolidating all 20 providers into one, two or three entities would save ratepayers money.
Vermont’s small utility world has been turned upside down since then. The Department of Public Service is moving ahead with Klein’s request in the aftermath of one of the biggest power deals in the state’s history.
Gaz Metro, the Montreal-based utility that owns Green Mountain Power, Vermont’s second largest utility has made a hostile takeover bid for Central Vermont Public Service, which serves 165,000 Vermonters. If the directors of CVPS accept the offer, Gaz Metro would consolidate Vermont’s two biggest utility companies into one entity that would provide electricity to 70 percent of Vermont ratepayers.
Green Mountain Power says the consolidation of the two companies will create efficiencies, eliminate managerial and operational redundancies and save ratepayers money. Job savings would come through natural attrition in the workforce and some reductions in force among top managers, according to Robert Dostis, a vice president for Green Mountain Power.
Klein is not an enthusiastic supporter of the merger. “This is the most radical change to our utilities over the last 60, even 100 years,” Klein said in an interview.
“The combining of these two utilities could be good or bad and a lot of questions and information need to come up to the surface,” Klein said.
If Fortis ends up winning out over Green Mountain Power, Klein expects CVPS to continue operating as it does now, but if GMP succeeds then the price of power can be expected to drop. Employees and ratepayers at other municipalities will be running to the general managers asking them to sell if power prices under GMP are much lower, Klein speculates.
“If Fortis wins this battle things will stay the same, if GMP wins this battle I think consolidation is inevitable,” Klein said.
In his April memo, Klein asked the department to look into “the cost of DPS and Public Service Board (PSB) regulations, such as staff, counsel, and expert witness or advisor retention; costs of electric utilities themselves, such as duplicative and administrative resources within the utilities, participation in regulatory proceedings and retention of outside assistance; and an estimate of savings to ratepayers, if any, that would accrue by reducing the number of utilities.”
Those savings, Klein said, would also likely come through job vacancies. There would be one general manager for a group of consolidated municipal utilities, for example, instead of 15 separate managerial salaries.
Dave Mullett from the Vermont Public Power Supply Authority sees it differently.
“I’d be frankly surprised if it (consolidating) saves money,” Mullett said. In his view, locally run municipalities have many benefits and they offer certain efficiencies in services.
The Department of Public Service’s Commissioner Liz Miller says it is too early to speculate on whether consolidating will save any money.
In a letter to Klein on Wednesday from Sarah Hofmann, deputy commissioner of DPS, Hofmann wrote that the department had begun mapping out a methodology and time line for the study.
“It will involve a great deal of work, reviewing and analyzing information both already in the hands at the Department and that which we will obtain through requests to the utilities,” Hofmann wrote.
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This story should have included comment from the co-ops and municipals. Talk with Barry Bernstein of Washington Electric and Barbara Grimes of Burlington electric. In any event I don’t believe the DPS or PSB has the authority to force the co-ops and munis to combine.
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Dave Mullett of VPPSA represents the municipals.
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It is surprising and disappointing to read of Rep. Klein taking positions like this, since he enjoys a reputation as an avatar of enlightened energy policy in Vermont.
Whatever you think of GMP, CVPS and the various plans for their respective corporate futures, we must keep in mind that these are investor-owned companies. Municipal utilities and electric cooperatives are part of the commonwealth — valuable and critical assets that generations of people built up at great cost. Any surplus generated by these enterprises belongs to the citizens of the municipalities and the member-owners of the cooperatives. These legacies should not be squandered.
Investor-owned utilities (IOUs) extract profits for outside shareholders — indeed, that is the WHOLE REASON these companies exist. Municipals and co-ops exist to serve their customers and they are subject to democratic control.
Even combining Vermont’s two electric cooperatives would be a profound mistake. Each has a distinct character and set of priorities. The Vermont Electric Cooperative is big into smart metering. The Washington Electric Cooperative is all about renewable energy. This is no coincidence; it reflects the values and priorities of their respective memberships. The autonomy each of these co-ops enjoy, to keep faith with the democratic control of their members, is a priceless asset. Moreover, because these entities are cooperatives they — believe it or not — actually cooperate. With each other! To the extent their are economies of scale to be achieved, the two cooperatives are either already working together (and with others of the 700+ electric cooperatives across the country) or could opt to do so if that serves the needs of their members by making electricity more affordable.
Please, vtdigger, bring us more about this study and, in particular, persuade Rep. Klein to tell us more about his thinking. I, frankly, am perplexed.
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. . . Indeed, an item on vtdigger.org this very day proves my point about the value of autonomous and democratically controlled electric co-ops. I refer to the story about a group of state legislators from the service territory of the Vermont Electric Co-op asking members of the Co-op to vote against a proposed transmission upgrade. Quite apart from the merits of the project, consider how valuable it is that the members have the right to exercise democratic control over such things.
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Hello all.
I have attached the memo from Rep. Klein in the story. Hopefully, this will help to further clarify.
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Don, care to expound a bit on what it might look like if all of Vermont utilities merged into a public power authority? I appreciate your point that each public utility has its own personality and that should be valued. However, what if GMP, CVPS, WEC, VEC, BED and the other small utilities were to merge and form one public power authority with control of VELCO? Aside from the legal issues (can’t force it), in theory, could you weigh the pros and cons of that scenario? Thanks.
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This is an interesting discussion. However, as a resident of Burlington and a former member of the Electric Commission, I am inclined to oppose any plan that would eliminate local control of our electric utility. The cost of power is important but it is not the only issue to be considered. Burlington Electric has been a leader in renewables and efficiency. Consolidation might make sense for the small municipal utilities (that’s their call) but it would take a lot to persuade me that it’s in our best interests.
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If the DPS looks at all the factors, including line miles and customers served per employee, they may find that some of the public utilties are doing the best job. I think we need to be real careful not to create a state that is soley dominated by one Investor-owned utility. The flexibility of a smaller utility, along with the efficiencies, allow for creativity and flexibility that have resulted in technical leadership. This kind of leadership may be more difficult in a large utility.
There may be more to a utility than customers per employee.