For Immediate Release
March 27, 2012
Contact: Elizabeth H. Miller, Commissioner 802-828-2321
Vermont Department of Public Service Wins Key Concessions in GMP-CVPS Merger
Increases Early Customer Savings, Fills Critical Gap in FY13 Weatherization Funds, and Ensures Ongoing Public Interest in VELCO
￼￼MONTPELIER, VT – The Vermont Department of Public Service (DPS) announced today that it has won major concessions from Green Mountain Power (GMP) and Gaz Metro regarding the acquisition of Central Vermont Public Service Corp. (CVPS), yielding significantly enhanced customer savings, investment in job-creating weatherization and efficiency funding, and increased public interest governance of VELCO. To memorialize these concessions, a Memorandum of Understanding between the DPS, GMP, and CVPS has been signed and will be provided to the Vermont Public Service Board for its consideration, consistent with common regulatory practice.
“We have been very clear that to win our support this merger must provide significant value for customers and promote the general good of Vermont as a whole,” said Elizabeth Miller, Commissioner of DPS. “The concessions we have achieved here assure public direction in the governance of our electric transmission company, VELCO, and require a merger savings plan far more favorable to customers than had been originally proposed by the companies. The agreement also ensures a significant investment in weatherization programs in the next two years, helping to fill a critical need, while saving energy and money for CVPS customers. These and other critical changes to the merger proposal significantly increase its value to customers and to Vermont as a whole.”
Substantially Enhances Merger Savings for Customers
The DPS has required that GMP substantially increase the value of the merger to customers in the early years and has also obtained a “double guarantee” for these savings in the first three years. Overall, under the agreement reached with the companies, customers will receive more than twice the value of merger savings in the first six years than had been proposed by GMP in the merger petition; the company will also continue its overall ten-year guarantee of $144 million in merger savings to customers.
“We fought hard to achieve earlier, greater savings for customers than had been proposed by GMP,” said Commissioner Miller. “We have secured concrete merger savings for customers in the first three years post-merger, and also have required GMP to split merger savings for the middle years of company integration 50/50 with customers – significantly increasing the early value of this merger for Vermont. We want this merger to succeed in delivering savings for customers and recognize that a great way to achieve that is to align customer and owner interests by sharing some of the merger savings while integration occurs. Meanwhile, GMP will be held to the $144 million guarantee of value over ten years that it has promised since announcing this merger.”
Weatherization Gap Filled for Two Years
To address the approximately $21 million “windfall sharing” obligation ordered by the Vermont Public Service Board previously, the DPS is requiring that the companies provide more than $21 million in net value to CVPS customers in the form of significant energy efficiency and other clean energy investments through the Clean Energy & Efficiency Development Fund (CEED Fund). Working with local community action agencies and efficiency providers, GMP will commit to invest the first $12 million in the CEED Fund before the end of 2013, with $6 million invested in the weatherization program by the next heating season.
“The CEED Fund is an expansion of the efficiency fund obligation that the Vermont Public Service Board found satisfied the ‘windfall sharing’ obligation when Gaz Metro acquired GMP,” said Commissioner Miller. “We have been clear that we view this obligation as one GMP must fulfill over and above the substantial merger savings it has guaranteed. This substantial investment in making homes more energy efficient will save money, create jobs, and reduce dependence upon heating oil. The CEED Fund will also allow for other important energy efficiency and clean energy investments for CVPS customers, and will create more value than the $21 million windfall obligation itself.”
Ensures Public Interest in VELCO Governance
The companies have agreed to ensure that they will not control the governance of Vermont’s electric transmission system post-merger. The DPS has required GMP, post merger, to reduce its influence over the governance of Vermont’s electric transmission system by agreeing to maintain only four seats out of thirteen on the VELCO Board of Directors (rather than the six seats the combined companies presently hold). The Department has also required the companies to cede majority control of VELCO by transferring 38% of the Class B voting shares and 31.7% of the Class C non-voting shares to a nonprofit public benefit corporation, now known as VLITE, that will oversee investment of dividends, expected to be $1 million or more per year, for purposes of furthering state energy goals.
“Under this agreement, VLITE will be governed by a board of directors drawn from public service and representatives of the energy, utility, and consumer advocate sectors, and will be entitled to select three qualified individuals with a broad range of relevant experience for nomination to the VELCO Board of Directors,” explained Commissioner Miller. “In addition, VELCO will maintain two independent Board members nominated by all public power owners of VELCO – our cooperatives and municipal utilities – to provide further balance to the VELCO Board. In this manner, we will achieve greater public direction and voice on the VELCO Board of Directors while ensuring that VELCO continues to have the expertise it needs on its Board.”
“With all of these important enhanced benefits, the Department is satisfied that the companies have met the concerns of the public and that the merger will further the general good of Vermont. We expect this merger to add value for customers for years to come,” Commissioner Miller concluded.
￼The Department of Public Service is an agency within the executive branch of Vermont state government. Its charge is to represent the public interest in matters regarding energy, telecommunications, water and wastewater.