Michael Dworkin, former chairman of the Vermont Public Service Board, filed testimony Tuesday on behalf of the state Department of Public Service regarding the corporate governance of the state’s transmission system.
In 40 pages of testimony, Dworkin outlined concerns with the proposed makeup of the Vermont Electric Power Company (VELCO) if the state’s two largest utilities merge.
Download Dworkin’s written testimony regarding VELCO.
Green Mountain Power and Central Vermont Public Service, the state’s two largest utilities, filed a petition to merge in September with the Public Service Board. The quasi-judicial board must approve the merger. If it does, Green Mountain Power would emerge as the surviving utility, and it would control nearly 80 percent of the utility market in the state and therefore control a vast majority of VELCO, the transmission utility. Green Mountain Power is a subsidiary of the Canadian utility Gaz Metro.
Green Mountain Power proposed shifting a one-third share of ownership to a low-income trust in order to divest some control. Under this scenario, the new merged Green Mountain Power-CVPS entity would own slightly less than half of VELCO.
Dworkin says this is not enough to mitigate the new utility’s dominance over the transmission system.
“While this proposed divestiture would reduce the Company’s VELCO ownership share from 78 percent to 45 percent, that ownership reduction by itself is not sufficient mitigation, in my view, to adequately rectify the dominance issue in this case,” the prefiled testimony states.
With such a large share of control, Dworkin’s testimony states, the new utility would be able to obtain a majority vote with the assistance of just about any other utility.
The testimony says an alternative that ensures a focus on long-term stability and the public good is key to VELCO’s success.
“An alternative plan that places sufficient management voice in those whose interests are aligned with the public’s would likely result in more equitable control and direction for statewide transmission decisions,” the testimony states.
Dworkin fell short of proposing either a cooperative, member owned, mechanism or the state buying the electric transmission system. The testimony states that a cooperative would not be practicable, in part, because of the large amount of capital it would take to buy the utility. As for the state taking over VELCO, it would have to compensate the utility likely to the tune of hundreds of millions of dollars — also an unfeasible scenario.
Representatives for VELCO and the utilities declined to comment on the testimony late Tuesday afternoon, since they had only recently received it. Dworkin also declined to comment since he is a witness in the pending proceeding.
In a written statement, Deputy Commissioner of the Vermont Department of Public Service Sarah Hofmann said, “With Mr. Dworkin, the Department explored a wide variety of options for the VELCO portion of the transaction from leaving the present structure in place to various forms of public or cooperative ownership. We believe Mr. Dworkin’s testimony submitted today sets forth a path that helps ensure that VELCO operates in the interest of Vermont and its ratepayers into the future.”
The Department will offer further testimony on Jan. 20 that will address other financial issues in the merger like the utilities’ claim that they will return $144 million to ratepayers in the first 10 years of the merger and how to deal with a so-called windfall sharing mechanism that requires the utilities to repay customers who bailed them out in a deal with Hydro-Quebec that went south.
