[O]pponents of a natural gas pipeline say Vermont Gas is using a legal maneuver to subvert the regulatory process in order to reap double digit rate increases.
The utility and the Vermont Department of Public Service forged an agreement earlier this month that caps ratepayer liability for the pipeline project at $134 million.
Gov. Peter Shumlin lauded the memorandum of understanding, but lawyers for several groups say the agreement is a “bad deal” for ratepayers and doesn’t reflect the total cost of the project. AARP and the Vermont Fuel Dealers Association have described the agreement as a “PR stunt” that puts political pressure on the quasi-judicial Vermont Public Service Board to bless the project with rate increases baked in.
Lawyers for Vermont Gas and state officials dispute that charge and say the board is taking too long to reapprove the license for the project. The MOU was designed “to support rapid conclusion” of the process.
Peter Zamore, an attorney for Vermont Gas, told the board at a status conference last week that the dilatory proceeding “creates an increasing risk to project budget, schedule and the project itself.”
And for that reason, Zamore asked that the MOU be included in the record for the reapproval of the license, even though hearings on the matter (the equivalent of a trial) ended in June.
The board originally issued a license, or certificate of public good, for the pipeline in late 2013. But over the past two years, construction costs have gone up 80 percent, from $87 million to $154 million. Ongoing construction increases prompted two separate reviews by the Vermont Public Service Board. One was conducted over a 30-day period last year.
The current review has been underway for 11 months, and a decision will be issued any day now.
Chris Recchia, the commissioner of the Department of Public Service, said if the board doesn’t act soon, the Vermont Gas pipeline project will be “endangered” and costs will go up.
“It’s getting to the point where we felt the board needed to know additional delays can endanger the cost of the project and the project going forward,” Recchia said. “We want them to make an affirmative decision.”
The Oct. 7 agreement between the state and Vermont Gas caps ratepayer liability for construction at $134 million, unless the project is hampered by demonstrations at construction sites or landowner fights over right-of-way access.
The MOU was developed outside the board’s deliberations on the license reapproval question, and Vermont Gas and the Department of Public Service are not seeking board approval for the agreement.
Don Rendall, CEO of Vermont Gas, says the MOU is a “win” for ratepayers because it requires the company to foot $20 million of the construction bill. The agreement, he says, is evidence that the company is looking out for ratepayers in the legal proceeding now before the board.
“We’re able to do it because we have the confidence to get the project done on time and on budget, and we have demonstrated we are able to make great progress in doing so,” Rendall said.
But James Dumont, a lawyer for AARP, says the deal guarantees Vermont Gas rate recovery for the pipeline. An expert hired by AARP has calculated that the total cost will be $270 million, including return of investment, return on investment and carrying costs over the life of the project.
Dumont says rate increases resulting from construction projects would be the subject of a separate, exhaustive review process by the Vermont Public Service Board. The board has also historically reviewed MOUs between the state and utilities as a separate matter, Dumont says. He cited agreements with Hydro-Quebec, as an example.
Vermont Gas is instead, Dumont says, asking the board to accept the MOU into the record, which would effectively bake in rate increases.
The company has not disclosed how much rates would go up as a result of the new section of pipeline.
AARP hired an expert to analyze the impact on ratepayers who determined that rates would go up by 15 percent to 19 percent for the company’s 50,000 customers.
Eileen Simollardes, vice president of the company, confirmed those figures under cross-examination at a PSB hearing in June.
Rendall says a rate case would be taken up in a year or so, and in the near future he anticipates a “moderate” rate increase of 2 percent.
The department will evaluate “the full impact on rates next year,” Recchia said.
“Anyone who knows exactly what is going to be put into rates here is either misinformed or not sharing the accurate process,” he said.
Vermont Gas has argued that the ratepayers will benefit from cheap, clean natural gas, which in the recent past was 30 percent cheaper than oil and propane fuel. In the past two years, however, oil prices have dropped from $100 a barrel to $40 a barrel, making it more competitive with natural gas.
Rendall says the pipeline will provide fuel to Cabot Co-op, Middlebury College and about 4,000 new residential customers in Addison County.
