Green Mountain Power says payback to ratepayers would "kill" merger deal; CVPS chief testifies $21 million was seaside for ratepayers
 

Green Mountain Power says payback to ratepayers would “kill” merger; CVPS chief testifies $21 million was set aside for ratepayers

Representatives for Green Mountain Power say an attempt by the Vermont Legislature to require a cash payback as a result of a utility merger could sour the deal.

Earlier this week, four representatives proposed an amendment to House Bill 468 that would require Central Vermont Public Service to pay ratepayers $21 million in cash rebates as part of a windfall sharing mechanism.

House Speaker Shap Smith said the amendment was not relevant to the bill, which dealt with a renewable energy mandate, so the house never debated it.

Now they have their sights on House Bill 718, an act relating to miscellaneous matters involving the Public Service Board and Department of Public Service.

Gaz Metro, Green Mountain Power’s parent company, would acquire CVPS if a pending merger goes through. A stipulation of that merger, as required by the Vermont Public Service Board, is that the utility return $21 million to ratepayers as a result of a bailout in the early 2000s when CVPS was on the verge of bankruptcy as a result of bad contracts with Hydro-Quebec.

The utilities propose investing the money in an efficiency fund instead of a direct cash payment to current ratepayers. The Department of Public Service generally supports the efficiency fund idea.

Dorothy Schnure, a spokeswoman for Green Mountain Power, said legislative meddling in the process could scuttle the merger.

“Intervention from the Legislature of this magnitude would likely kill the deal and the opportunity to deliver hundreds of millions of dollars to Vermonters,” Schnure said.

The utility proposes that it will achieve $144 million in savings for ratepayers in the first 10 years of the merger as well as transfer $1 million annually to a low-income trust.

Schnure said it is a very complex process, and changing one aspect of the merger “would have a significant adverse effect on the deal.”

The AARP, which has intervened in the Public Service Board docket, has pushed for direct cash payments to all CVPS customers based on usage and rate class.

Now four representatives are pressing for the same thing and conditioning the board’s approval of the merger on this type of payback.

Cynthia Browning, D-Arlington, Patti Komline, R-Dorset, Paul Poirier, I-Barre, and Chris Pearson, P-Burlington, proposed the amendment this week to the energy bill.

Now the coalition is pushing to add the amendment to the more general DPS and Public Service Board bill.

Pearson said the group had about 60 lawmakers on board with the idea based on conversations Friday.

Browning said there are a lot of unknowns surrounding the future of the bill. For one, she said, some lawmakers may sign on to the idea, then change their minds once utility lobbyists catch their ear. She is also skeptical that it will reach the House floor for debate.

Browning said she thinks the cash payback is important in that the utilities need to keep their word.

“It’s really a question of honoring the deal,” she said. “A promise is a promise.”

Browning said a cash payment would be an infusion of cash for town governments, ski areas, farms and struggling businesses.

“It’s like a little stimulus package,” she said.

The utilities and the Department of Public Service contend investing the money will yield far greater benefits to the state as a whole from decreased usage due to weatherization and other measures.

House Bill 718 is currently in the House Committee on Appropriations.

House Speaker Shap Smith said he had not looked at the specific sections of the proposed amendment or the underlying bill, but he said his general sense is that it probably is germane.

Smith said the lawmakers would have to propose the amendment on the House floor.

He said there are concerns in the House about whether the Legislature should intervene in an ongoing administrative proceeding.

“Many people have some concerns about whether it’s appropriate to interfere in an open docket while testimony is ongoing,” Smith said. “There are a number of people who wonder whether this particular vehicle is the best way to return value to ratepayers.”

Personally, he said, he would rather the Legislature did not get involved in the proceeding.

“I prefer that we not pass legislation that interferes with open dockets with the Public Service Board,” he said. “If at some point in time if you continue to do that you begin to question whether we should have a Public Service Board at all.”

Smith said lawmakers have other means to express their opinions to the Public Service Board. For example, they could write a letter.

Next week will determine whether the Legislature even discusses the amendment proposed by the four lawmakers.

Meanwhile, technical hearings in the Public Service Board docket continue. Utility lawyers representing the various intervenors will continue to question witnesses and press them on the finer details of the merger.

While the utilities argue legislative intervention is a deal breaker, James Dumont, the attorney representing the AARP in the docket, said that is nonsense.

Dumont said cross examination of CVPS CEO Larry Reilly and email exchanges obtained through discovery show Gaz Metro already committed to paying back the money.

A highly-redacted email of May 25, 2011 from Gaz Metro CEO Sophie Brochu to Reilly states, “We also confirm that this revised offer reflects the application of the Vermont Public Service Board’s order, reflected in docket numbers 6460 and 6120 entered on June 26, 2001, to share profit from a Transaction (above book value) up to a total of $16 million, adjusted for inflation (currently $21 million), with ratepayers.”

Dumont said Gaz Metro accounted for the windfall through a reduction in the purchase price.

Now Dumont claims the utility is trying to invest ratepayer money instead of windfall money.

“They said they were going to pay it, now ratepayers have to,” he said. “It’s crazy.”

Alan Panebaker

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31 Comments on "Green Mountain Power says payback to ratepayers would “kill” merger; CVPS chief testifies $21 million was set aside for ratepayers"

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Randy Koch
4 years 6 months ago
The arrogance of the monopolist utilities is breath-taking! They talk about how “legislative meddling” is going to mess up even worse corporate consolidation? Meddling? That used to be called democracy. Will this weaken the authority of the PSB? So be it! After all, they behave like utility sock puppets most of the time anyway. And above all, if this messes up the merger, let’s all get out our hankies and have a good old cry! This merger, like all mergers, will have the effect of conferring more and more political power on this corporate sector and that will inevitably be… Read more »
Cynthia Browning
4 years 6 months ago
It is very interesting to hear GMP say that paying the CVPS ratepayers back will scuttle the takeover, and then learn that they certainly assumed they would have to make this payment when they set the terms of the deal. Direct cash payback to CVPS ratepayers of the bailout money is the right thing to do and the right time to do it to help Vermonters. Investments in weatherization and efficiency are good things to do, but this is the wrong money to do it with. It is important to note that the legislature set up the Public Service Board… Read more »
Neil Mortensen
4 years 6 months ago
There must be something missing here. Today’s article states: A highly-redacted email of May 25, 2011 from Gaz Metro CEO Sophie Brochu to Reilly states, “We also confirm that this revised offer reflects the application of the Vermont Public Service Board’s order, reflected in docket numbers 6460 and 6120 entered on June 26, 2001, to share profit from a Transaction (above book value) up to a total of $16 million, adjusted for inflation (currently $21 million), with ratepayers.” And without seeing the actual document to infer context, I’m assuming Ms. Brochu is talking about the renewable energy proposal as she… Read more »
Neil Mortensen
4 years 6 months ago
Could we get some clarification here? In VTDigger’s Thursday article, Jim Dumont of the AARP said testimony revealed that Gaz Metro was always prepared to pay the money, implying that they were always fine with paying the $21 million directly to ratepayers. Is the quote in today’s article from a redacted email written by Ms. Brochu to Mr. Reilly where that assertion comes from? If so, without further context from the email, it seems pretty clear they always planned on offering an alternate proposal that would satisfy the repayment requirement. I’m not sure what plan they’re discussing in that email… Read more »
Tom Pelham
4 years 6 months ago
There’s so much wrong here. The orginal deal was very clear. A merger would trigger the commitment to return the $21 million extracted from ratepayers by the Public Service Board to bail out CVPS, including it’s shareholders, from bankruptcy. Now, the utility oligarchy, GMP/Gaz Metro (possibly with our elected leaders and utility regulator in tow) say they have a surrogate plan to keep this commitment and if they don’t get their way, the merger will die (and CVPS shareholders won’t make their 50% profit from the transaction, worth over $147 million to these shareholders) http://finance.yahoo.com/q/bc?s=CV+Basic+Chart&t=2y Now, Gaz/Metro insists they must… Read more »
Dan Maxon
4 years 6 months ago

I doubt this is the position the utilities take with the bankers who loan them money.

John Groton
4 years 6 months ago

It’s time for that Neal Lunderville guy to step in and convince his company GMP of what is right for Vermonters. He won’t let them rip us off.

Doug Hoffer
4 years 6 months ago

To extend Mr. Pelham’s argument, what does this tell us about how the new majority owner will manage VELCO?

To all those who reacted in shock to the proposal by Senators Illuzzi, Ashe, and Galbraith that VELCO become a quasi-public entity I urge you to reconsider your position.

Wendy Wilton
4 years 5 months ago

Doug, perhaps for the first time I totally agree with you! Vermonters need some sort of check and balance on the utility monopoly that is about to be created, and I support the VELCO ownership concept.

Chuck Kletecka
4 years 6 months ago

A direct cash payback may mean an over $4 million windfall for CVPS’s largest customer, OMNYA. Much better if that money goes to current customers who truly need it.

4 years 6 months ago

That would be Omya you are referring to. Are you saying Omya is not a current CVPS customer?

Alex Barnham
4 years 6 months ago
Who will enforce the law, the contractual agreements, the good faith? Not the consumer and certainly not the courts. Perhaps not until we have lost everything and then it will be too late. Wall Street is full of this type of theft. Read this article about Greg Smith who is leaving Goldman Sachs because of their dishonesty. http://www.nydailynews.com/blogs/pageviews/2012/03/greg-smith-goldman-basher-to-write-a-book If what he says is true, we need to hear and learn from it. If what he says is not true, he will be in jail. I don’t think he will go to jail. Greg Smith: a Stanford education, a Goldman vice-presidency.… Read more »
Bruce Post
4 years 6 months ago
One lacuna in Vermont history is a comprehensive account of private utilities in Vermont and their grasp for dominance. Yet, a slightly more than cursory knowledge of the historical record reveals how the private utilities are relentless in their “power grab” and how they have successfully used allies within the Vermont political structure to achieve their ends. One breathtaking example of this is described in the book “Philip Hoff: How Red Turned Blue in the Green Mountain State”, written in part by longtime utility lobbyist and former Aiken aide Steve Terry. During Phil Hoff’s attempt to create a “non-profit corporation,… Read more »
Duncan Kilmartin
4 years 6 months ago
I’ll keep it brief. “Liar, liar, pants on fire”, applies to Mary Powell, Dorothy Shnure, GMP in general. But the corruption extends to the Shumlin administration, who with inside knowledge, told the Nova Scotia bidders to get lost. The $21 million is the tip of the iceberg. They hide all the secret terms behind the stonewall of “proprietary information”, and then when they leak out, they threaten us with “loss of the deal”, which emanates from their arrogance. Finally, when will we wake up and realize that everything comes from the taxpayers and ratepayers, and the utilities get a guaranteed… Read more »
David Usher
4 years 6 months ago
An interesting turn of events in the GMP/Gaz Metro CVPS merger now in regulatory hearings. The debate seems to me to circle around the method of repayment to ratepayers. This one may well go to the courts to decide, depending on what the PSB determines as the intent from the original PSB decision in 2000 when CVPS was on the ropes financially. I think the AARP has the better argument and they have been spending significantly on TV advertising to make their case with the public. The Legislature would do well to let the PSB decide the merger docket and… Read more »
David Dempsey
4 years 6 months ago
Shap Smith says that the house is concerned about intervening in the “ongoing administrative procedure”. The efficiency fund proposal is a thinly veiled attempt to commit highway robbery. If they are allowed to “invest” our money in this efficiency fund, they will get a $21 million liability (loan payable to rate payers) off their books and keep the $21 asset (rate payers money) on their books. They justify their plan by offering a vague promise of unexplained future savings. Their plan will add $21 million dollars to the net worth of CVPS, furthing lining the pockets of the CVPS administrators… Read more »
Dave Bellini
4 years 6 months ago

After reading this I think I will sign up for AARP.

4 years 6 months ago
I wouldn’t count on the PSB to do well by Vermonters re: cost accounting. I wish some independent scrutiny was applied to the costs of the Lowell wind project, where GMP’s project estimates grew and grew as management made decisions that kept increasing the costs. Intervenors asked the PSB to review the project’s viability based on dramatically increased costs. The PSB refused. The way the PSB handled the Lowell wind case deserves a hard look, even from those of you who support wind energy development. If you have a head for numbers and look at the record, you should be… Read more »
David Dempsey
4 years 6 months ago
Shap Smith says the house is concerned about intervening in the “ongoing administrative procedure”, alluding to the sale of CVPS. CVPS is proposing to “invest” $21 in ratepayers money that they “borrowed” into a efficiency fund with promises of some future benefits (just monthes after the PSB approved a rate increase of over 8% went into effect). The actual intent of their efficiency fund proposal is to get a $21 million liability (loan payable to ratepayers) off the books and keep the asset ($21 million of ratepayers money) on the books. This increases the net worth of CVPS by $21… Read more »
4 years 6 months ago
I’ll be more specific about how GMP’s Lowell wind project costs increased. Among other increased costs, post-CPG GMP decided to use much larger and different wind turbines than had been considered during the PSB technial hearings. The turbines GMP chose were 20 feet taller than considered in testimony (thereby increasing the aesthetic impact), with 4.5 MW blades on 3 MW towers (thereby increasing noise) and, most relevant to this discussion, at an increased cost of $20 million. GMP told the PSB that the increased cost would be offset by a higher capacity factor, but evidence supporting that statement was not… Read more »
Coleman Dunnar
4 years 5 months ago
Shap Smith, ( Shumlin’s right hand man) is now saying “I prefer that we not pass legislation that interferes with open dockets with the Public Service Board,” Anybody beginning to notice a pattern here? If the administration doesn’t like the possibility Public Service Board my rule contrary to the administration desire they have no problem stepping in to enjoin the Board from acting (Vermont Yankee) Now that the likelihood is the Board may support the administration’s position they are opposed to legislative intervention. Nice flip flop…. Vermonter’s have a very low tolerance for hypocrisy. You borrow from Peter you pay… Read more »
Chuck Kletecka
4 years 5 months ago

Individual commercial customers get enormously higher pay-backs than residential customers. An editorial in the Bennington Banner on March 14th says it all:

…the average residential customer would receive about $76 or less in a cash payment, representing the low end of repayments, while the average industrial user would receive about $12,500, based on much higher electricity usage.

A lot of folks portray this as a David and Goliath story. The truth is more like Goliath pays back Goliath. The old lady next door gets small change while commercial customers get thousands. How does that feel?

4 years 5 months ago

The utility bailout was $21 million in the early 2000s. The amount returned to rate payers should include interest for at least 10 years; at 4% per year compounded, the amount would be 1.48 x $21 million = $31 million.
After all, the utilities had use of that money, used it as any capital asset to make profits, would have had to pay interest at at least 4 percent per year (likely a much greater percentage because of poor credit risk) on any bank loan.
Alternative, the rate payers could be given a $31 million equity stake in any merged company.

John Greenberg
4 years 5 months ago

Coleman Dunmar draws a parallel where there is none. He quotes Shap Smith as saying: “I prefer that we not pass legislation that interferes with OPEN dockets with the Public Service Board…” (emphasis added) He then brings up Act 160, which was passed at a time when there was no open docket at the PSB.

Cynthia Browning
4 years 5 months ago
Several more comments to add to this interesting discussion. First, the ratepayers are only getting back PART of what they paid to keep CVPS from bankruptcy — the rest went into the value of CVPS that GMP is now buying from the shareholders. What ratepayers might get back is in proportion to what they paid in extra costs, and the higher the electric bill of a customer, the more they paid in. That is why industrial users will get back more than residential customers: they paid in more to bailout CVPS. I have it from people working for CVPS and… Read more »
4 years 5 months ago

I am very curious about the underlying motivation of AARP, an organization which promotes more expensive insurance to its membership. Some legislators seem determined to override legally established administrative procedures, which may very well have unintended consequences such as those affecting Judge Murtagh’s decision re Vermont Yankee.

4 years 5 months ago
Sam: Our “underlying motivation” is to represent the more than 35,000 AARP Vermont members in the CV rate territory by helping to provide them a voice on this issue. AARP Vermont argued for, and won, the windfall protection provision in the 2001 Board order that approved rate increases for GMP and CVPS customers. The proposed merger has triggered that order, and we want to see direct payments or refunds go back to ratepayers. It’s pretty simple – Gaz Metro/GMP/CVPS don’t want to pay their debt to ratepayers in real dollars. We strongly believe that this is wrong and are making… Read more »
Michael Reddy
4 years 5 months ago
KILL THE MERGER! 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… Read more »
Nancy Carey
4 years 5 months ago

Payback now!

4 years 5 months ago
The issue of corporate responsibility and democratic principles aside, $21 million dollars as a base for funding improvements in energy efficiency would have a profound, broad-based and lasting positive impact on the State. This would be enough to stimulate energy retrofits for thousands of residential and commercial buildings. Hundreds of jobs could be created and millions of dollars in annual heat savings could be permanently secured all across the state. Yes the money should be returned to rate payers, but the difference between a one time payout of $71 per household and the potential for permanently saving millions of dollars… Read more »
Rob MacG
4 years 5 months ago

Great article & replies, very informative. In the end I cannot think of a better reason for our household to go solar and get off this grid.

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