Green Mountain Power statement on vote to reject Browning amendment regarding CVPS merger

April 27, 2012
Statement on the vote today to reject Rep. Browning’s amendment
Dorothy Schnure, Green Mountain Power spokesperson

“This merger will provide $177 million dollars of guaranteed total value to Vermonters. We are pleased that the House chose not to interfere and direct the Public Service Board how to rule in a pending docket. PSB has taken months of testimony and it is the right forum to consider all of aspects of the merger in order to decide what is in the public good.

We are also pleased that the House members reinforced the importance of not interfering with the Public Service Board’s decision-making in an open docket by passing J.R.H. 37.”

Background

The merger is designed to deliver significant, on-going benefits to CVPS and GMP customers
· By operating as one company, the new GMP will be far more efficient.
· Unprecedented value for Vermont — $177 million guaranteed in first ten years. Hundreds of millions after that. Value that can only be achieved by merging these two companies.
· GMP limited to minority ownership of VELCO
· Investment in efficiency and weatherization will yield $46 million in value, thus $25 million net benefit for CVPS customers
· Improved customer service and reliability from merging adjoining service territories
· Savings will be achieved without layoffs, other than some executives, or forced relocations.
· Commitments to Rutland to ensure CVPS home community benefits from merger

Customers will save millions of dollars
· GMP’s original proposal guaranteed $144 million in savings to CVPS and GMP customers over the first ten years following the merger, hundreds of millions more into the future.
· The concessions made to the Dept of Public Service increase the savings and benefits from $144 million to $177 million over 10 years.
· At the DPS request, GMP added an additional $25 million in net benefits to customers from investments in efficiency and weatherization. Total value is $46 million, customers will see $25 million benefit after the investor is paid back.
· Investment in efficiency has precedent in GMP 2007 sale. GMP’s efficiency fund has doubled the value for customers.

The Legislature should allow the Public Service Board to hear the merger case without interference
· The GMP/CVPS merger is in the middle of a regulatory process at the PSB. The PSB should be allowed to do its job and the Legislature should not interfere in a pending case.
· Intervening on one issue diminishes the regulator’s authority as it sends the message that if you don’t like the decision you think the PSB will make, you can do an end run by asking the Legislature to intervene.
· All Vermonters, whether homeowners or businesses, count on predictable legal and regulatory processes. Having the Legislature dictate certain decisions while that process is ongoing creates uncertainty that fosters an unstable economic environment for Vermont
· The current PSB is well respected around the state. The PSB created the provision now in question, analyzed and ruled on it in 2007, and recently completed extensive testimony on it.

The discussion over how to return the $21 million obligation has distracted from the significant benefits of the merger.
· This is a once in a lifetime opportunity to make a change that will bring permanent cost savings and benefits for nearly three quarters of Vermont electric customers.
· Customer savings over 20 years is expected to be $500 million dollars
· There are few opportunities, like this merger where actions today can yield such significant savings for so many of Vermont citizens and businesses.

Windfall obligation details.
· The windfall sharing mechanism was not a loan or a bailout. It was one part of a comprehensive rate order in which the PSB was setting just and reasonable rates for CVPS.

· In establishing the windfall sharing mechanism in 2001, the Board specifically left open the manner in which the mechanism should be implemented if CVPS were ever sold. The Board did not specify that ratepayers had to be given refunds or bill credits.

· In the 2007 case approving Gaz Metro’s acquisition of GMP, the Board specifically ruled that Gaz Metro/GMP’s proposal to make investments in energy efficiency measures, including investments in thermal efficiency measures (weatherization), satisfied the very same windfall sharing mechanism. The Board members today are the same as in 2007.

· In doing so the Board explicitly rejected the argument that customers should get a cash refund and rejected the argument that the investment in energy efficiency measures should not be recovered, along with a rate of return, in rates.

· The Board was clear about this. The Board’s order is consistent with ratemaking and how efficiency investments have been treated in rates for at least twenty years.

· Instead, the Board ruled that the windfall sharing mechanism is satisfied so long as the ratepayers receive benefits from the investment that exceed, by the required amount, the amount of the investment.

· The Board created the Windfall Sharing Mechanism in 2001 and the Board interpreted its own ruling in 2007, as it should. GMP and the DPS properly relied on the Board’s 2007 ruling

· In the present merger case GMP is proposing to make $21 million in investments in energy efficiency measures that will provide at least $46 million in benefits to CVPS’s customers. As a result, CVPS’s customers will be receiving at least $25 million in value above and beyond the amount of the initial investment.

· The efficiency investment plan is one part of a comprehensive package of benefits to customers from the merger, guaranteeing $177 million in customer benefits. There are no guarantees for the investor. And if savings are greater, the customer will get even more.

Comments

  1. Randy Koch :

    Wow, stranger than fiction, now Dotty Schnure tells us we’re going to get $500M from the GazMet takeover! But wait a minute: if there was that much fat all along, why has the PSB allowed it? Isn’t that what our PSB is supposed to be doing up there in its little treehouse, untroubled by democratic interference?

    It’s always possible that these estimated savings are just numbers pulled out of thin air. Critics have been saying all along that it is impossible to project costs out even a few years let alone for the 10 life of the MOU.

    So let’s just say for the sake of argument that the numbers have in fact been goosed. Then where is the guarantee in these “guaranteed savings”? Would GazMet be signing a contract to give the public $500M come hell or high water? Not on your life! Yet some of the savings are clearly low hanging fruit, pretty safe bets. GazMet says they will shed higher paid, experienced employees by attrition and hire low paid replacements. That’s surely why the deal stipulates that these early savings will go mostly to Gaz Met. They will go to help finance the takeover, an aspect of the bigger scandal that the press and legislature have scarcely noticed.

    But then there’s this one detail of the MOU that you hear nothing about: if the $144M (or you can pick another number du jour) doesn’t materialize, is there a sanction? No. GazMet would simply go back to the PSB in 2022 and say, sorry, we need to amend our MOU. That’s what they are calling a guarantee: GazMet guarantees it will try!

    In the unlikely event that the PSB would disagree, the PSB doesn’t have any enforcement powers of its own but must appeal to the Supreme Court. But in any case, sanctions don’t seem to play a part of the regulatory model a PSB uses. Look at what happened when GMP and CVPS made “imprudent” investments 10 years ago. The PSB allowed the utilities to bill their customers for their screw ups because otherwise they would have gone belly up. That would mean the bond rating would have gone down and the ratepayer would have been on the hook for the higher costs of borrowing. Now 10 years later, the owners of CVPS stand to collect many, many millions from the takeover without taking any sort of haircut.

    If Gaz Met has such a lock on the system now, how much worse will it be if the takeover goes through?

  2. Don Peabody :

    Au contraire, mes ami; let me rephrase the statement, please: The discussion over how to return the $21 million obligation has distracted from significant DEBATE CONCERNING THE LIABILITIES OF the merger.

    • Michael Reddy :

      Exactly. And thank you. Why is there so little discussion about the other aspects of this merger and their huge long term implications on the state? Consolidation and foreign control by giant petroleum corporations of the VT grid and rights-of-way. Monopoly. Tar Sands Oil through the NEK. Anyone? Anyone?

  3. Randy Koch :

    Liabilities? Isn’t this supposed to be a “once in a lifetime” bonanza?

  4. Steven Farnham :

    A little Haiku for this occasion?

    ‘Tis that time of year–
    Fertilizer doth abound:
    Ms. Schnure spreads manure.

  5. Karl Riemer :

    Could someone please explain?
    – Promises were made to PSB: dun ratepayers now to keep us afloat, if we survive we’ll reimburse them someday.
    – Someday arrives. Promises turn out to be negotiable.
    – Because weatherization somehow benefits everybody, reimbursement is proposed to be recoverable, meaning ratepayers will reimburse GazMetro for (let’s pretend) reimbursing ratepayers.
    – This sequence of exchanging IOUs for cash, then turning the IOUs into more cash, is considered consistent and reasonable established practice.
    _ The taxation model for utility rates having become sufficiently onerous, resistance is proposed in the form of legislative intervention, triggering alarums.
    (Taxes are, inexactly but hypothetically, collected according to ability to pay and distributed according to need. Those decisions are made by governments elected by those taxed. Utilities are also monopolies, but since they’re for-profit corporations beholden only to shareholders, regulatory agencies keep them in check. Payment is based on consumption, restrained by regulation. Regulatory agencies are creatures of government, representing the interests of the monopolies’ customers. *The monopolies’ customers* – not the monopolies, not the executive branch, not the citizenry or jurisdiction as a whole. Their regulatory function is to limit utility profits to what the utility needs, including capitol costs, compensation and shareholder dividends. It is not to reward, redistribute, or socially engineer. Rate revenue is not tax revenue.)

    The question is: what degree of collusion between regulators and monopolies warrants legislative interference? If regulator and regulated speak with one voice, if the executive branch routinely sanctions apparent sweetheart deals, at some point it’s incumbent upon the legislature to intervene. That does not imply disrespect for nor distrust of the PSB. It says that the public advocate, the DPS, is not advocating for the public. The PSB depends on the DPS for that advocacy; if the DPS sees ratepayers as taxpayers and utilities as collectors of revenue for public projects, the PSB is not being well served and the appropriate voice of dissent is our voice, the legislature’s voice.

    Utilities would like nothing better than a collaborative relationship with the DPS. “We’ll pretend we intend; you’ll say that what we predict might possibly someday actually happen and that’s good enough for us.” How much collusion warrants intervention?

    So, for us, it comes down to: are Shumlin/Powell/Miller’s assurances plausible? From this article:
    – merger will provide $177 million dollars of guaranteed total value to Vermonters… Hundreds of millions after that
    – weatherization will yield $46 million in value, thus $25 million net benefit for CVPS customers
    – sends the message that if you don’t like the decision you think the PSB will make, you can do an end run by asking the Legislature to intervene.
    – The current PSB is well respected around the state
    – This is a once in a lifetime opportunity to make a change that will bring permanent cost savings and benefits for nearly three quarters of Vermont electric customers.
    – The windfall sharing mechanism was not a loan or a bailout
    – the Board specifically left open the manner in which the mechanism should be implemented if CVPS were ever sold
    – The Board did not specify that ratepayers had to be given refunds or bill credits
    – $21 million in investments in energy efficiency measures that will provide at least $46 million in benefits to CVPS’s customers. As a result, CVPS’s customers will be receiving at least $25 million in value above and beyond the amount of the initial investment (this mantra is apparently the chorus)

    The individual statements range from self-evident to inexplicable but together they imply that to disagree with the facts stated is to disagree with the conclusions drawn, which are
    1) that because GazMetro and the DPS presented their case in unison, no other opinion is germane. That is untrue. The PSB exists to implement legislative policy; the legislature’s opinion is paramount in their deliberations. It’s not the legislature bucking the system, it’s DPS by failing its mandate. And
    2) that the proposal as proffered is take-it-or-leave-it, that less munificent terms will scuttle the deal. That might be true, we don’t know; determining that is essential to the PSB’s decision. Do you believe they’re close to that cliff?

    You can’t blame a utility for playing robber baron. That’s their MO. You can blame a sheriff for playing moll. You can blame DPS for acquiescence; call it Charlie McCarthyism.
    That’s only perception. Perhaps borrowing $ from CVPS customers, repaying it by insulating some GMP/CVPS customers’ houses, then recouping that “investment” by sending us the the bill actually is in our best interests. The DPS has a small army of well-educated people on staff whose mission in part is explaining regulatory matters to us. How is it none among them appears able to use remotely intelligible language, reasoning or math in demonstrating that this Byzantine scheme isn’t the rip-off it appears? So far DPS has only managed to parrot Gaz Metro gibberish, of which this press statement is a synopsis. If we hear “at least $25 million in value above and beyond” enough times we’ll stop wondering how that could possibly be true, and if true how it could possibly be pertinent, and realize straw is gold? Will we blink and suddenly believe that, because the repayment mechanism was not a loan or a bailout (duh!), the bailout itself was not a bailout, the loan itself not a loan? that because repayment terms were unspecified, repayment is optional? that inherent merger reduction-of-redundancy savings somehow represent largesse of utilities to their customers, in gratitude for which we should forgive their debts? that estimated future added “value” and unspecified “benefits” equal money, are worth anything calculable at all? Maybe DPS didn’t roll over and play scratch-my-tummy on this but it’s making no effort to allay the perception of representation of the utilities (as in pleading their case) before the legislature and PSB. Wouldn’t that (reprehensible, if true) be precisely when the legislature *should* consider “interference”?

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