As the Vermont Public Service Board considers allowing the state’s two largest utilities to merge, the fate of millions of dollars is still undecided.
Green Mountain Power plans to return $144 million in savings to ratepayers in the first 10 years after the merger. In what form remains to be decided.
The state’s largest utility, CVPS, is obligated to repay $21 million to ratepayers as a result of a bailout in the 1990s in which utilities were allowed to raise rates in order to avoid bankruptcy. Green Mountain Power and CVPS claim this debt will be satisfied through reductions in operational costs over a decade. The utilities say the savings will be passed on to ratepayers.
Groups like the AARP, which intervened in the docket, and the Department of Public Service, which represents the public, are not convinced that the utilities’ original proposal satisfies their obligations to return a windfall to ratepayers who bailed them out more than 10 years ago.
Numerous proposals have been floated for spending the $21 million, which the Department of Public Service argues the utilities need to pay back in addition to savings that will already accrue as a result of the merger.
The AARP asked for a reimbursement to current ratepayers.
Most recently, Vermont’s community action agencies have requested that the board consider spending this $21 million in “windfall” money on the state’s weatherization assistance program, which lost $1 million of year-end carry-forward money in the state’s efforts to restore LIHEAP funding. Federal funds through the American Recovery and Reinvestment Act, which helped fund the low-income weatherization program, will likely be spent soon.
Steve Geller, executive director of Southeastern Vermont Community Action and president of the Vermont Community Action Partnership, said the suggestion was give utilities a better way to invest the “windfall” money in the future.
“We’re just saying when you’re thinking about where to put this windfall money, weatherization would be a good place,” Geller said.
Geller said the federal stimulus funds helped increase the state’s capacity to help weatherize homes. With the loss of those funds, the momentum could be lost.
Unlike the AARP proposal, which would spread the money around to all ratepayers, the community action proposal focuses on low-income people, but Geller said the groups want to help everyone.
“We want to emphasize we’re not trying to take money out of anyone’s pocket,” Geller said. “We just want to put out our best idea for how this money could be used to help Vermonters.”
In written testimony, the Department of Public Service addresses options for the windfall money, including efficiency measures and returning cash to ratepayers.
Asa Hopkins’ testimony outlines criteria for ratepayer reimbursement, such as linking the amount of returned benefits to higher rates paid, meaning commercial ratepayers would likely get a greater share.
DPS Commissioner Elizabeth Miller said, “The department’s position is that value from the windfall should be returned to CVPS ratepayers, and the department proposed a number of possible programs that would not only return the full value but also be able to leverage that value to create greater benefits.”
The DPS agreed with the AARP that the windfall money should be in addition to the $144 million in savings that will accrue as a result of the merger. Hopkins testimony, however, points out that giving a refund to existing ratepayers (somewhere around $70 for residential customers on average) would not create a lasting benefit.
In separate testimony by economist John Wilson, the department was skeptical about the purported savings.
The merged utility will save $82.4 million. According to Wilson’s testimony, the company’s benefits would accrue faster than the ratepayers’ benefits. In the first six years after the merger, the utility would benefit $63.7 million, while ratepayers would see $19.1 million in savings.
The DPS also points to areas, such as double leverage financing, in which the companies will benefit but ratepayers will not.
This so-called “double leveraging” is a rarely used financial strategy where a subsidiary company’s equity capital is funded by debt issued at the parent company level. In effect, Vermont utilities’ equity could be financed by Gaz Metro’s (Green Mountain Power’s parent company) debt. Gaz Metro, Green Mountain Power’s parent company, proposed using this method.
The technique, according to Wilson’s testimony, can be financially risky because there is more debt and less equity financing the enterprise than there would be otherwise.
Allowing the company a return on the debt-funded portion will result in additional profit for the company while ratepayers will be charged more than the company’s actual capital cost, the testimony states.
“The department would like to see the sharing between ratepayers and the acquiring company favor the ratepayers far more than the merger petition has requested,” Miller said.
Dorothy Schnure, a spokeswoman for Green Mountain Power, said the utilities are looking at all the proposed options for the savings that will result from the merger. Company executives say the $144 million in savings would take care of its obligations under the Public Service Board’s precedent.
“We believe the original proposal is significant and satisfies the board order” that requires the utilities to share profits as a result of a merger, Schnure said.
She said the slower rate of ratepayer savings comes from the fact that the company would be achieving savings more slowly through attrition rather than through layoffs at the outset.
Schnure also emphasizes that during the first 10 years after the merger, ratepayers will receive more savings than the company and after that all savings go to ratepayers. She also emphasizes the amount of savings that would not occur if Fortis, the other company that bid to purchase CVPS, was able to take over the utility. Green Mountain Power and CVPS have service territories in the state that look like something of a patchwork quilt. Combining the two will allow for a much smoother operation, she said.
As for the promised savings, Schnure said, “We expect to live up to those promises, and we expect regulators will ensure we live up to promises. Those savings are guaranteed. It just makes sense.”
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Glad to see the reported story, but think it’s important that Green Mountain Power’s full identify be exposed in every story about this merger: Green Mountain Power is owned by GAZ METRO, a Canadian Corporation described in an earlier vtdigger story as being owned by Enbridge and other transnational corporate giants with interests in dirty tars sands schemes that exploit lands and peoples of the north (a simplification; you could link your own story from last July which is quite specific and detailed–please do!) and pipelines to transport that are likely to cause environmental devastation every step along the way (not to mention the “Game Over” statement of Dr. James Hanson regarding the burning of tar sands).
So, where in this story is a reference to whether or not the Public Service Board is considering whether or not it is in the public interest to allow these corporations to merge, thereby yielding control of more than 70% of Vermont’s power generation to transnational corporations?
This is my hope for vtdigger.org! Help us to focus on what is really important in each chapter of the the larger story. Vermont “ratepayers” (otherwise known as citizens) might be better served by our energy interests being held by public, quasi-public, cooperative or–at the very least–state- or regionally-based companies. In the long run, this is likely to be more important than a short-term payout.
Let’s talk about it!
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What a deal we have for you, 99%! We will make your “regulated” monopoly even more monopolistic, and in exchange we promise you—well not exactly promise, but , honest, we’ll try real hard to “save” you $144 million. Well actually we owed you rubes $20-something million from when you saved us from going belly up, silly us. But if you let us get even more too big to fail, we’ll pay you back pretty soon. Ok, not for at least six years. Oh and since our investors don’t want to take a chance on the merger, we’re going to borrow instead and you hicks are going pay our interest payments in your bills. But it’s gonna be great when the 1% guys at Gaz Metro are running things. We’ll be so big in the Statehouse that they will probably have to enlarge the doors. After all, that’s what access is all about. Thanks a lot, suckers!
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The proposed takeover of CVPS by Green Mountain Power poses a grave threat to the state of Vermont. Just like the idea of “renewable wind power”, Green Mountain Power sounds so wholesome and Vermont-y, but as is the case with industrial ridgeline wind projects, further investigation reveals a seedy underside carefully managed by well paid Public Relations teams, Lawyers, and Lobbyists to hide the truth from the public. Researching GMP means untangling an intentionally confusing web of dummy corporations—a literal shell game to obfuscate the truth and avoid taxes.1 The truth is, GMP is wholly owned by GazMetro (which already owns Vermont’s only natural gas utility) which is in turn owned by Noverco. Noverco is wholly owned by Enbridge and “the Caisse”/Trencap L.P. It is at this level that the extent to which these corporations systematically destroy ecosystems, ignore property rights, and undermine local autonomy to extract every last dollar of profit becomes clear.
Using data from Enbridge’s own reports, the Polaris Institute calculated that the 804 spills on Enbridge pipelines between 1999 and 2010 released approximately 7,083,090 gallons of hydrocarbons into the environment.2
Some “highlights” include:
-On July 4, 2002 an Enbridge pipeline ruptured in a marsh near the town of Cohasset, Minnesota spilling 252,000 gallons of crude oil. In an attempt to keep the oil from contaminating the Mississippi River, the Minnesota Department of Natural Resources was forced to set a controlled burn that created a smoke plume 1-mile high and 5 miles long. 3
-Two separate 2007 failures of an Enbridge pipeline in Wisconsin resulted in over 176,000 gallons of crude oil being released onto farmland, contaminating the local water supply. 4
-In 2009 Enbridge agreed to pay a paltry $1 million to settle a lawsuit brought against the company by the state of Wisconsin for 545 environmental violations perpetrated while building a different pipeline–the $2.1 billion Southern Access pipeline designed to transport tar sands crude oil from Alberta, Canada to Chicago, IL. In a news release from Wisconsin’s Department of Justice, Attorney General J.B. Van Hollen said “…the incidents of violation were numerous and widespread, and resulted in impacts to the streams and wetlands throughout the various watersheds.” 5
-In July of 2010, a leaking pipeline in Michigan spilled at least 1,139,000 gallons of oil into Talmadge Creek leading into the Kalamazoo River and the Great Lakes. 6
Enbridge is currently developing the Gateway Pipeline through unceded First Nations’ lands to ship 525,000 barrels of tar sands crude/day to Asia. They are also developing a major pipeline to deliver natural gas extracted through fracking in Pennsylvania7, and they have a history of extrajudicial killing of opponents to their 450 mile pipeline in Colombia8, and have devastated indigenous communities in Wisconsin, Minnesota, Michigan, Alberta, and Quebec by taking local farmers’ and unceded First Nations’ lands without compensation.
Trencap, through which “the Caisse” owns a large portion of GMP, was previously known as Infragaz, and is an owner of petroleum distribution systems around the world, most notably the pipelines formerly owned by Shell that transport nearly all of the gas produced on the Norwegian Continental Shelf (NCS) to consumers on the European continent.
Vermont is about to be bought out by an evil energy behemoth–the same one building the equivalent of 21 forty-story skyscrapers on our mountaintops name of “green energy”. Former Gov. Aiken would be rolling in his grave. Do your own research, and stand up to demand an end to this madness.
1 http://vtdigger.org/2011/07/07/gaz-metro-green-mountain-power/
2 http://www.tarsandswatch.org/files/Updated%20Enbridge%20Profile.pdf
3 http://www.ntsb.gov/doclib/reports/2004/par0401.pdf
4 http://www.jsonline.com/news/wisconsin/29343664.html
5 http://www.hertzschram.com/CM/Articles/67_First%20Consolidated%20Class%20Action%20Complaint%20and%20Jury%20Demand.pdf pg. 5
6 http://www.epa.gov/enbridgespill/index.html
7 http://www.tarsandswatch.org/files/Updated%20Enbridge%20Profile.pdf
8 http://www.policyalternatives.ca/publications/monitor/july-2004-enbridge-spreads-disaster-columbia
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I agree with AARP (and not just because I am over 50). The ratepayers saved CVPS from bankruptcy in the 1990s. GMP (or even Fortis) would not be able to acquire today if it had not been for the ratepayers “bailing out” CVPS.
As a ratepayer, this is “our” money. To paraphrase former President George W. Bush (in regards to tax dollars):
“It’s your money”
… meaning it’s “our” money (the ratepayers).
I think they should pay back the bailout amount with interest included. Also, for all of those CVPS execs (stock options) and investors who are making a profit on the sale to GMP, they are able to do so in part because of the ratepayer “bailout”.
A “promise” of future savings is not good enough. The ratepayer bailout and future expected savings are two different issues. Please don’t conflate these two issues. Pay back what is owed to ratepayers. The ratepayers should also expect to share in any future savings as well.
If they don’t pay back the ratepayers, the money stays in Canada, where Gaz Metro, Noverco, Enbridge, et al are located. If the ratepayers get what is due to them, the money will stay in Vermont and help the local economies in our state.
Micheal, thank you for the infomation about July 2010 Enbridge spill into Kalamazoo River tributary. I am originally from Michigan, and heard that story last summer on the news and from relatives. I had no idea of the tie between that spill and the proposed ownership of CVPS. Thank you for your post.
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Publicly educated and entertainment focused consumers are about as likely to care as the man in the moon.
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Michael Reddy,
Thank you for your well-researched expose of GMP which is acting like the camel’s nose for foreign interests at the expense of Vermont households and businesses.
With its foreign-financed wind turbine facility at Lowell Mountain, which has foreign-built, 459-ft high wind turbines with 373-ft diameter rotors, GMP has done more environmental damage in a few months than Vermont Yankee did in 40 years.
Ever since big US highways and big ski resorts (mostly owned by out-of-state entities) took over, Vermont’s environment has been going downhill and Vermont’s wind energy oligarchy with its influence/control over the legislative process, is “helping out” big time.
Whatever happened to small is beautiful? Vermonters have forgotten? Why not send some legislators to Montpelier who will stand up for Vermonters, instead of kowtowing to special interests.
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Funny Willem doesn’t mention that VY’s fuel is “foreign.”
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Where and how do we protest this decision. I think that it is a poor idea to help a company expand with their fine while other companies who have followed the course of the law are not experiencing a forced improvement in services. This is an investment that the company needs to take seriously and make with their own dollar AFTER paying back ratepayers.
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Thanks for all the comments, but as far as the merger, it is quite evident that the governor and GMP’s management have a meaningful connection, if you know what I mean. So all our responses probably won’t mean a thing.
And, using our money for operational costs seems like stealing to me, how about you?