AARP wants CVPS to return $21M to ratepayers as part of GMP merger deal

Green Mountain Power CEO Mary Powell. VTD/Anne Galloway

Green Mountain Power and Central Vermont Public Service claim that a merger of the two utilities will result in $144 million in savings in the first 10 years.

That is not enough for the AARP, which contends that CVPS needs to return $21 million to ratepayers as a result of an imprudent contract both utilities entered more than a decade ago. The AARP filed testimony to that effect before the Vermont Public Service Board this week.

“The issue we’re talking about today is really about fairness and fairness in the most basic way,” said Greg Marchildon, AARP Vermont state director.

A Public Service Board decision in 2001 established a so-called “windfall sharing mechanism” by which the board allowed utilities in the state that had locked into a bad contract with Hydro-Quebec to raise electricity rates in order to avoid bankruptcy. The catch was that in any future sale of the utilities to another entity, money would have to go back to ratepayers.

The state’s two largest utilities, which are at the center of a merger proceeding before the Public Service Board, propose that the $144 million in savings along with a new trust for low-income customers will satisfy this obligation.

AARP officials say that proposal won’t satisfy the original agreement.

“If the newly merged utility, saves $144 million over 10 years, great, but that does not relieve them of their responsibility,” Marchildon said.

The disagreement prompted the organization, which represents people who are 50 and older, to embark on a full-fledged ad campaign, in addition to its filing with the board. Marchildon would not divulge to reporters Wednesday just how much the AARP plans to spend on the campaign but that it will exceed $10,000.

In 2001, the board decided CVPS should return $16 million to ratepayers if it sold to another company (a fraction of the supposed $130 million that could have been avoided by not locking into the contract). The $21 million figure is the result of inflation, according to the AARP.

The board tested the windfall-sharing mechanism when the Canadian utility Gaz Metro acquired Green Mountain Power in 2007. In that case, the AARP and the utility came to a settlement and created a pilot program to help low-income Vermonters. As Gaz Metro acquiers CVPS through the merger, the issue has arisen again.

Richard Silkman, a principal at the Maine consulting firm Competitive Energy Services, co-wrote the written testimony on behalf of AARP.

Silkman and Vermont attorney Peter Bradford were also involved in the 2001 proceeding. Silkman compares the bailout to the federal government loaning money to Chrysler and other corporations who had to repay their debt.

Two years later, Chrysler met its objective, stayed in business and made money. At that point, the corporation repaid the government. The utilities are in the same situation, Silkman said. They essentially got a loan from ratepayers, and now they need to pay it back, he said.

The utilities’ argument that the merger would return benefits to ratepayers in lieu of a cash repayment is akin to Chrysler arguing that now that it makes money and has created jobs, it does not have to pay back the federal government, Silkman said.

While the money CVPS and Green Mountain Power plans to return to ratepayers in the form savings is a good thing, Silkman said, “You don’t count that any more than Chrysler can get money back from the government.”

The AARP proposal sets a rate schedule in which current CVPS customers would receive a per kilowatt-hour amount. An average residential customer would receive $76.37. This does not take into account ratepayers who paid higher rates to bail out the utility 10 years ago but have since moved or died.

Green Mountain Power and CVPS maintain their plans for saving ratepayers money through more efficient operations meet the requirements of the original agreement.

Dorothy Schnure, a spokeswoman for Green Mountain Power, maintains says the proposed $144 million was an integral part of the merger proposal and it, in addition to a low-income trust that will contribute $1 million annually to a low-income rate program, satisfies CVPS’ obligations to ratepayers.

“That value would not be possible without the merger,” Schnure said.

When Gaz Metro acquired Green Mountain Power, the settlement created a mechanism that returned more than the amount that was required to ratepayers, Schnure said. Likewise, the low-income trust proposed by the utilities will continue to offer benefits that likely go beyond the $21 million that is required.

The utilities are not likely to get support on this score from the Department of Public Service. The department already filed testimony last week stating that the utilities’ efforts to cede control of the state transmission utility did not go far enough to protect the public.

Elizabeth Miller, commissioner of the Vermont Department of Public Service, said the department agrees with AARP that the “windfall” money needs to be returned to ratepayers in addition to the savings that will result from the economies of scale that come with the merger.

“The Department agrees with AARP that, consistent with the Public Service Board’s orders in 2001 when the ratepayers assisted GMP and CVPS in remaining financially solvent, the value of what is called the ‘windfall’ money should be additive to, and not simply included within, the ratepayer savings that would be achieved in a merger,” Miller wrote in an e-mail to VTDigger.org Wednesday.

As for the method of achieving the goal of the board’s 2001 order, the department will review various options in its testimony, which is due Friday, Miller said.

The department’s position is a shift from the 2001 case, where CVPS and the department contended that increased rates were just and reasonable and AARP disagreed.

Gov. Peter Shumlin also said he thinks the utilities need to reimburse ratepayers.

“As you know I firmly believe that any merger has to be in the best interest of the ratepayers,” Shumlin said. “The ratepayers paid that money out, and now that good times have come to the stockholders, I think the ratepayers should have their good times taken care of first.”

Sixteen other parties intervened in the proceeding before the Public Service Board, and pre-filed testimony for all of them is due Friday.