Green Mountain Power announces slight rate decrease as a result of merger with CVPS

GMP CEO Mary Powell

Mary Powell, CEO of Green Mountain Power, testifies at a technical hearing on the merger of GMP and Central Vermont Public Service. VTD file photo/Alan Panebaker

Green Mountain Power, a subsidiary of Montreal-based Gaz Metro, will reduce electricity rates by 0.4 percent starting Oct. 1 as a result of the company’s recent merger with Central Vermont Public Service.

It’s the first time Green Mountain power has reduced rates since 1988.

This is a real boon for consumers and companies, company officials say, as the average annual increase in power rates is 3 percent to 4 percent. Rate increases have fluctuated from less than 1 percent to about 9 percent in recent years.

The 0.4 percent reduction is the equivalent of a 40 cent drop on a $100 monthly power bill, according to Dotty Schnure, spokeswoman for the company.

The savings for customers statewide is $2.5 million. More than 70 percent of Vermont ratepayers, or 250,000 customers, now get their electricity from Green Mountain Power, as a result of the merger in June with CVPS, the state’s largest utility.

Green Mountain Power officials say the merger made the anticipated 0.4 savings possible.

In a statement, Mary Powell, CEO of GMP, said: “Green Mountain Power is fully committed to a cost-effective future for the Vermonters we serve while also working to significantly improve services and reduce the frequency and duration of outages.”

Powell said customers are already “beginning to experience benefits of the recent merger through our ability to keep customer costs lower and through our improved response time to the weather events that hit hard many Vermont homes and businesses in July.”

Shortly after the announcement, press statements lauding the rate reduction were issued by Gov. Peter Shumlin, Department of Public Service Commissioner Elizabeth Miller, Frank Chioffi, head of the Greater Burlington Industrial Corp., Win Smith, CEO of Sugarbush Resort, GE Aviation in Rutland HR leader Justin Warsinskey and John Castaldo, president of the Central Vermont Council on Aging.

Miller said the rate filing “reflects the first year of guaranteed savings to customers required by the merger order.”

“It also sets a base from which future merger savings will be measured over the next decade, and shows us that the company is willing to work hard to hold the line on costs in order to deliver the benefits promised to customers in the merger,” Miller said.

Shumlin said the rate reduction is “a promising start for the new company as it works over the coming years to deliver on its merger promises.”

“This rate decrease is a good example of why I supported the GMP/CVPS merger, as Vermonters are already seeing the benefits of the merger through these real cost savings,” Shumlin said. “I have said for months that this merger will save money for Vermont families and help our businesses create jobs, and this great news is further evidence of that fact.”

Not everyone was as sanguine about what the deal means for ratepayers.

Rep. Cynthia Browning, D-Arlington, sought to pass legislation that would have required Gaz Metro to return $21 million to ratepayers that was borrowed by the company to pay off debts related to high priced power from Hydro Quebec. Had a rebate gone through, the rebate would have been $150 per customer on average, or $70 per residential ratepayer, she says.

The $2.5 million rate reduction, she says, pales in comparison with the $21 million that should have been refunded to consumers and businesses. Instead, Gaz Metro will offer $21 million in efficiency and weatherization savings to the state, which will be recouped in rates. Browning also says Gaz Metro, which hopes to save $226 million, thanks to efficiencies in operations and new technology, will use $80 million of that savings to pay for the merger.

“I’m happy they did it and I hope the later merger savings really materialize,” Browning said. “The rate reduction is a small amount compared with what they’ve already taken from ratepayers, which is by my estimation $120 million. The fact is the annual rate decrease might give back a benefit $2 million. Trying to take political credit for that is contemptible.”

Anne Galloway

Comments

  1. Hod Palmer, :

    A $0.40 savings a month X 12 = $4.80 annual electrical savings. Hooray, what a great deal for the rate payers! They should be ashamed to even announce this, to say nothing of trying to tell us they really care…Hogwash!

  2. Randy Koch :

    Duck! Incoming horse pucky! The way the whole GazMet/GMP mob is spinning it, the great GazMet/GMP cash cow is generously doling out to grateful ratepayers a $2.5 million as an early Christmas present. It’s “the deal of a lifetime”.

    What’s wrong with this picture is that ordinarily a regulated utility is only allowed to recover its actual costs. That’s the bargain. The state gives the utility an exclusive territory to operate in as a monopoly, without any competition. But in return, the state regulates prices to prevent monopoly from charging ripoff rates. Ordinarily the utility gets rates set to cover its costs plus a guaranteed a hefty return to its owners on their invested capital, around 8%.

    All that goes out the window if you are GazMet/GMP. If you are GazMet/GMP, you can bid an outrageous price premium in the bidding war to take over CVPS and form a combined company with lower operating costs. But because you are GazMet/GMP, the PSB doesn’t make you lower rates accordingly. Because you are GazMet/GMP, you lower them fractionally ($2.5 million for the first year) and run off to the bank with the rest. That sure takes all the sting out of the ridiculous overpayment you made for CVPS in the first place. So there, Fortis!

    But seriously, this deal is utterly corrupt. Instead of trumpeting a tiny rate decrease, the press should get to the bottom of how big the GazMet ripoff really is. Against this $144 million in “savings”, how much of our legitimate ratepayer reductions is GazMet being allowed to steal?

    The first corruption is in language–just ask George Orwell. To stop the spin, we have to stop referring to the little sweeteners as “savings” that GazMet/GMO is generously “sharing” with us. The press has to research and report how much GazMet/GMP is being allowed to steal. Chances are really good that it will make the $21 million bailout repayment pale by comparison.

  3. GMP would not be able to practice its method of “sharing” without the nod from Shumlin and his PSB.

    One of the most glaring examples of this “sharing” is the grab, with Shumlin’s approval, by GMP of the $21 million that belonged to CVPS rate payers and that CVPS should have paid to rate payers, but instead included in its balance sheet to make CVPS appear more asset-rich and therefore get a better price which benefitted the top CVPS managers who walked off with bonuses of up to $8 million.

    Vermont politics at its worst?

  4. Cynthia Browning :

    Just to review the merger math, GMP is keeping about $80 million in merger savings that should have gone to the ratepayers in lower rates. They have kept the $21 million CVPS ratepayer bailout that should have been returned immediately, and they will recoup another $21 million in higher rates based on how they “invest” our money.

    So by my calculations, GMP has taken $122 m that should have gone to ratepayers.

    This current rate decrease is certainly better for ratepayers than an increase, but it is much smaller than it should have been. The decrease should have been at least twice as big, and we should have had a one time credit on our bills of $150 each from the return of the $21 million.

    GMP and DPS and Shumlin are trying to look as if they care about ratepayers. If they did, they wouldn’t have taken $122 million from us. They are trying to put lipstick on a pig. Vermonters won’t be fooled.

    Rep. Cynthia Browning, Arlington

  5. David Dempsey :

    Mary Powells statement failed to mention that, despite promises of enormous customer savings, the first bill from the new company included a 12 month 2.2% increase in rates due to tropical storm Irene. But they did give customers a break. They are only going to charge 1.4% for the first three months. This reduces the increase in rates to “only” 2% for the Irene rate increase. For a $100 a month bill, this amounts to a $24 a year increase. Subtract the $4.80 for the rate decrease and you have a $19.20 increase which works out to a 1.6% rate hike. I know the increase is due to the storm costs, but an increase is an increase. The rates did not go down .4%, they went up 1.6% whixh makes the headline “rate decrease”, plain and simple, a lie.

  6. Mike Gardner :

    How is it possible that people from both sides of the aisle agree that the GMP/CVPS merger is corrupt and pure and utter BS, yet the politicians continue to ignore us all.

    This whole thing stinks to high heaven…is anyone in Montpeculier listening???

  7. Randy Koch :

    Montpelier doesn’t have to listen to anybody but GazMet, the uber-utility. What good would it do you to buck GazMet? You would be throwing away all the rewards that come of getting into the big GazMet bed: future employment, advancement in your legislative or administrative career, invitations to schmooze with political heavyweights, etc. Plus the spin on this story has been so intense that hardly anyone in the press even understands the issue so in addition to shooting yourself in the foot, you’ll just be making a fool of yourself in public.

    So don’t expect anything from Montpelier (except for the lonely band around Rep. Cynthia Browning. See her comment above) You won’t be disappointed.

    • Cynthia has my vote if she runs for Governor.

      Vermont did very well under Governor Kunin, a caring, fair-minded person.

  8. paul kidder :

    We just got out first GMP bill. Our consumption was 100 kWh less than last year but our bill is $ 20 more. What in the world is going on here. Can anyone explain?

    • Paul,

      High cost renewable energy (the much bragged-about PV Solar and soon the wind energy from Lowell Mountain) is being rolled mostly into the household rate schedules.

      More is coming. Your vote to oust these people counts in November.

  9. Ron Pulcer :

    Kudos for Rep. Browning for continuing to stay on this issue of GMP / CVPS merger.

    Prior to the Public Service Board blessing of the Gaz Metro / GMP / CVPS merger, I contacted the PSB to submit a comment and question. I was referred to the Dept. of Public Service Board, which I called. The PSB rep told me that they could not take comments or speak about an “open case”, so I should contact the Dept of Public Service instead.

    My comment was basically this, given the rate increase bailout (valued / capped at $21 Million): I worked at CVPS during the time prior to the rate increase, and during that time CVPS invested in and created a non-regulated subsidiary, Home Service Store (HSS), with money from Eversant. Eversant is/was a subsidiary of Catamount Resources Corp., which is/was a subsidiary of CVPS. After CVPS used profits from Catamount to start HSS, they later sold equity in HSS back to other investors, such that CVPS had 49% equity, meaning they gave up their majority interest (for whatever reason).

    After giving up the majority interest, CVPS used IT employees and other employees who were normally assigned to distribution business (regulated by PSB), to do work on HSS, including systems development. The employees were filling out 2 timecards; one for CVPS and one for HSS.

    That sounds good on the surface as technically HSS would be “billed” for IT services. However, HSS was not profitable for the first few years (at least), and as such was not able to actually pay back CVPS for these IT services for awhile.

    So prior to the rate increase (bailout), CVPS was spending regulated money / employee time on non-regulated business, for which they no longer had majority ownership anymore.

    My question to Dept. of Public Service was if they know if HSS ever paid CVPS back for IT Services, if/when HSS became profitable? The person I spoke with at Dept. of Public Service seemed to be satisfied based on the fact that they kept two sets of time records for IT work.

    I had to fill out two timesheets for one week, since I did a small amount of work for HSS. But another co-worker who we hired specifically as an additional Work Management systems developer was eventually working full-time for HSS for months. There were other CVPS systems analysts as well doing HSS work. We were all in one large room, and some folks were doing distribution systems work and others were doing HSS (or both).

    Given that the ratepayers were not given back the $21M for rate increase bailout, it makes me still wonder if ratepayers were actually paid back for CVPS’ work / services for HSS, if/when HSS became profitable.

    http://www.vermontguides.com/2000/5-may/may1.htm

    http://www.getfilings.com/o0000018808-02-000003.html

    “Eversant, also a subsidiary of Catamount Resources Corporation, invests in unregulated energy and service-related businesses. Eversant had a 13.4% ownership interest, on a fully diluted basis, in HSS as of December 31, 2001. HSS establishes a network of affiliate contractors who perform home maintenance repair and improvements via membership. HSS began operations in 1999 and is subject to risks and challenges similar to a company in the early stage of development. HSS launched a Commercial Services division in 2001, which meets the needs of small businesses, building owners and property managers. In May 2001, Eversant entered into a convertible loan agreement with HSS and Jupiter Capital (“Jupiter”). Under the agreement, Eversant loaned HSS $2.0 million and Jupiter loaned HSS $5.0 million, which, along with current debt balances and accrued interest, was converted to preferred securities when HSS received an additional cash investment from Jupiter in August 2001. I n September 2001, Eversant recorded a $1.2 million after-tax write-down of its investment in HSS to fair market value. Eversant has previously recorded losses of $9.0 million related to its investment in HSS. At year end, Jupiter committed, based upon continued satisfactory operating progress, to provide an additional $5.0 million in funding to the business over time. The first $1.0 million was invested in December 2001 and Jupiter received options to acquire up to an aggregate of $4.0 million in preferred securities. In January 2002, Jupiter invested an additional $1.0 million and predicts that an additional $2.0-$3.0 million in funding above the $5.0 million may be required and they are currently talking to other parties about providing this capital. Eversant’s fully diluted ownership position after the $5.0 million Jupiter investment would be 12.6%.

    In February 2002, HSS announced that Michael Froning, formerly President of the Southern Division of Circuit City Stores, will become President and Chief Executive Officer.

    Eversant’s share of the HSS losses for 2001 was zero as the Company’s equity investment was reduced to zero as a result of losses incurred to date. As of December 31, 2001, Eversant has a preferred equity investment in HSS of $1.4 million, recorded at estimated fair value.”

  10. The reality, so hastily whitewashed by this announcement of a “rate decrease” is that the price of energy is only going one way. Up.

    It’s fine to dream of renewables “dotting” Vermont’s landscape, powering a renaissance of tech and industry which will provide the state with a strong economy for decades to come. There are still many viable solutions to the state’s and world’s resource limitations, but they are much less glamorous than what investors or consumers want to see.

    Wind farms, compact fluorescents, smart meters, and nuclear power all represent significant “acheivements” in engineering. With that said, innovation without care and caution assumes significant risk.

    A few weeks ago, it was reported that CFL bulbs emit increasing levels of ultraviolet rays as the phosphor coating inside the bulbs break down over time. This information should be causing an uproar among the millions who have spent hundreds of dollars swapping out every bulb in their home to save energy. The sad thing is that consumers have been left in the dark with figures of watts, lumens, and lifespan instead of being provided helpful qualitative information, like this diagram http://upload.wikimedia.org/wikipedia/commons/b/b0/Spectral_Power_Distributions.png

    No doubt, the merger represents an incredible feat of engineering, regardless of how beneficial it becomes for all stakeholders. Luckily, some choices (like lightbulbs) can be changed as often as we like.

    This electricity marriage is for good, so we’d better buck up and power down.

  11. I’am very unhappy, my usage hasn’t changed much, but my bill has nearly trippled since GMP took over! I no longer want this special” smart meter” on my home any more! Please REMOVE Them ASAP!!! Its bad enough we have to try to recover after the Irene Flood, high fuel & gas prices and increasingly higher grocery cost, now we have to get it from the power company too! Where is it gonna end???
    Thank You for Your attention to this,
    Sincerely,
    Jenny M. Savage

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