Energy & Environment

Shumlin administration, Gaz Metro seal merger deal

Commissioner of the Department of Public Service Elizabeth Miller. VTD/Josh Larkin

Commissioner of the Department of Public Service Elizabeth Miller. VTD/Josh Larkin

The state of Vermont and its two largest utilities are one step closer to an agreement that could seal the deal for an historic merger.

The Vermont Department of Public Service, Green Mountain Power and Central Vermont Public Service released a memorandum of understanding Tuesday that could serve as the framework for the certificate of public good the utilities need to receive before they can become one company.

The proposal addresses many of the lingering issues that continue to cause concerns in the proposed merger of the state’s two largest utilities under one parent company — Gaz Metro of Quebec.

The proposed agreement would allow the Department of Public Service to appoint three members of the 13-member board of directors of the Vermont Electric Power Co. (VELCO), which manages the transmission system across the state. It would also require the utilities to invest $21 million in an efficiency fund as a result of a windfall requirement on CVPS to return money to ratepayers.

The department issued a press release Tuesday stating it had “won major concessions” from the utilities that would yield more customer savings, fund efficiency and weatherization and increase public interest governance of VELCO.

One concession, said Dorothy Schnure, a spokeswoman for Green Mountain Power, is that more money in savings will go to ratepayers sooner.

“Customers are getting more savings earlier,” Schnure said.

In pre-filed testimony, the department pressed the utilities on their proposed financing that would allow the utilities to keep the lion’s share of savings in the early years after the merger.

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The utilities say the merger would result in $144 million in savings to ratepayers in the first 10 years after the deal goes through. The memorandum of understanding requires the utilities to provide $2.5 million to ratepayers in year one, starting Oct. 1, $5 million in year two, $8 million in year three, half the savings in years four to eight, and all of it in years nine and 10.

Another sticking point for the utilities and the state has been the makeup of VELCO. The transmission utility manages the state’s physical electrical grid, Transco. The board is made up of utilities based on their market share of the retail electricity market. Currently CVPS and Green Mountain Power have a combined six seats on the board.

The MOU would leave the new Green Mountain Power with four seats. Representatives from a low-income trust would hold three seats. The department would appoint these directors from government agencies, policy groups, low-income advocates and public power utilities. The utilities would also transfer about a third of the voting shares of VELCO to the trust, which the utilities claim will produce $1 million per year in dividends.

“There was a lot of talk around makeup of VELCO board,” Schnure said. “I think what we’ve come up with is something people are agreeing satisfies a lot of the concerns.”

The board’s makeup has created controversy among utilities and in the state Legislature.

Three senators have pushed for a study of state ownership, and at least one utility, Washington Electric Cooperative, says someone should look into the idea of public ownership.

Representatives for VELCO have said public involvement would disrupt the company’s governance and emphasized that the company is not for sale.

Kerrick Johnson, vice president of external affairs for VELCO, said it was too soon to say what the utility’s position is on the proposal.

“We’ve just gotten the proposed agreement,” he said. “We are reviewing it and will be in discussions with our other owners as part of our process to arrive at an informed opinion and decision on the proposal.”

In a media statement, DPS Commissioner Elizabeth Miller said, “The concessions we have achieved here assure public direction in the governance of our electric transmission company, VELCO, and require a merger savings plan far more favorable to customers than had been originally proposed by the companies.”

Sen. Vince Illuzzi, an intervenor in the docket, was at first highly critical of the department’s position and asked for independent counsel based on a conflict of interest in that Miller’s husband works for the law firm that represents Green Mountain Power.

Illuzzi later backed off, and then pushed for legislation that would fund a study to determine the merits of state ownership of up to 51 percent of VELCO.

Illuzzi said he could not comment substantively on the proposal Tuesday, but he said, “The highlights indicate positive movements in the direction I thought would be best for ratepayers and state of Vermont.”

Illuzzi has also supported the idea of funding low-income weatherization programs in the state through the windfall money.

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Under the proposed MOU, Green Mountain Power would partner with community action agencies to invest $6 million in Vermont’s Weatherization Program before Dec. 1 with another $4 million before Dec. 1, 2013.

Other “windfall” money would be invested in efficiency and clean energy programs. The Community Energy and Efficiency Development Fund would be based on a similar fund developed when Gaz Metro purchased Green Mountain Power.

The compromise, which meant the industry would invest an additional $21 million pursuant to a previous board order, appeased the department. But Greg Marchildon, executive director of AARP Vermont, said the move is “audacious.”

AARP has pushed for a direct cash payback to CVPS customers throughout the proceeding.

Marchildon says the proposal is a double whammy. Ratepayers had to bail out the utilities in the 1990s when they entered into imprudent contracts with Hydro-Quebec. Now, Marchildon said, the utilities are taking ratepayer money and investing it in causes they should be pursuing anyway.

Marchildon said the investment in efficiency is a means of circumventing the legislative process to avoid raising taxes to pay for things like weatherization.

The AARP continues a media campaign targeting Gov. Peter Shumlin to ensure ratepayers get cash back.

“One of the things we know the MOU does is it clearly states the governor has decided to side with the power companies as opposed to the people,” he said.

The MOU is a persuasive document for the Public Service Board, which will ultimately determine whether the proposed merger is in the public interest.

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Alan Panebaker

About Alan

Alan Panebaker is a staff writer for VTDigger.org. He covers health care and energy issues. He graduated from the University of Montana School of Journalism in 2005 and cut his teeth reporting for the Ashland Daily Tidings and Mail Tribune newspapers in Southern Oregon where he covered education and the environment. A dedicated whitewater kayaker and backcountry skier, he later wrote a weekly outdoors column for the Anchorage Press in Anchorage, Alaska, and continues to publish freelance work for Canoe & Kayak magazine. Alan took a three-year hiatus from journalism to attend Vermont Law School. After passing the bar, he decided to return to his journalism roots and start chasing stories again. He lives in Montpelier.

Postscript: Alan died in a kayaking accident on Sept. 19, 2012, shortly after he took a job with American Whitewater. We here at VTDigger mourn his passing.

Email: [email protected]

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