The Vermont Department of Public Service is conducting a study to determine whether the consolidation of Vermont’s 20 electric utilities will save ratepayers money. The review is slated for completion on Dec. 31.
Rep. Tony Klein, D-East Montpelier, chair of the House Energy and Natural Resources Committee, requested the study in April, according to a memo obtained from the department.
Read the memo. Rep. Tony Klein’s request; DPS response
The state has 20 utilities ranging in size from Central Vermont Public Service, the state’s largest power provider, to Vermont Electric Co-operative, which serves 10 percent of ratepayers, to 15 village and town power departments sprinkled across the state. The municipal electric entities were formed by the Rural Electrification Administration in the 1940s and 1950s.
In the letter sent, dated April 26, Klein asked the DPS to examine whether consolidating all 20 providers into one, two or three entities would save ratepayers money.
Vermont’s small utility world has been turned upside down since then. The Department of Public Service is moving ahead with Klein’s request in the aftermath of one of the biggest power deals in the state’s history.
Gaz Metro, the Montreal-based utility that owns Green Mountain Power, Vermont’s second largest utility has made a hostile takeover bid for Central Vermont Public Service, which serves 165,000 Vermonters. If the directors of CVPS accept the offer, Gaz Metro would consolidate Vermont’s two biggest utility companies into one entity that would provide electricity to 70 percent of Vermont ratepayers.
Green Mountain Power says the consolidation of the two companies will create efficiencies, eliminate managerial and operational redundancies and save ratepayers money. Job savings would come through natural attrition in the workforce and some reductions in force among top managers, according to Robert Dostis, a vice president for Green Mountain Power.
Klein is not an enthusiastic supporter of the merger. “This is the most radical change to our utilities over the last 60, even 100 years,” Klein said in an interview.
“The combining of these two utilities could be good or bad and a lot of questions and information need to come up to the surface,” Klein said.
If Fortis ends up winning out over Green Mountain Power, Klein expects CVPS to continue operating as it does now, but if GMP succeeds then the price of power can be expected to drop. Employees and ratepayers at other municipalities will be running to the general managers asking them to sell if power prices under GMP are much lower, Klein speculates.
“If Fortis wins this battle things will stay the same, if GMP wins this battle I think consolidation is inevitable,” Klein said.
In his April memo, Klein asked the department to look into “the cost of DPS and Public Service Board (PSB) regulations, such as staff, counsel, and expert witness or advisor retention; costs of electric utilities themselves, such as duplicative and administrative resources within the utilities, participation in regulatory proceedings and retention of outside assistance; and an estimate of savings to ratepayers, if any, that would accrue by reducing the number of utilities.”
Those savings, Klein said, would also likely come through job vacancies. There would be one general manager for a group of consolidated municipal utilities, for example, instead of 15 separate managerial salaries.
Dave Mullett from the Vermont Public Power Supply Authority sees it differently.
“I’d be frankly surprised if it (consolidating) saves money,” Mullett said. In his view, locally run municipalities have many benefits and they offer certain efficiencies in services.
The Department of Public Service’s Commissioner Liz Miller says it is too early to speculate on whether consolidating will save any money.
In a letter to Klein on Wednesday from Sarah Hofmann, deputy commissioner of DPS, Hofmann wrote that the department had begun mapping out a methodology and time line for the study.
“It will involve a great deal of work, reviewing and analyzing information both already in the hands at the Department and that which we will obtain through requests to the utilities,” Hofmann wrote.
