In a tense meeting, members of the Vermont Senate peppered Department of Public Service Commissioner Elizabeth Miller with questions about a proposal that would allow the state’s two largest utilities to invest $21 million in ratepayer money for weatherization rather than cut checks for their customers.
The lingering issue in front of the Vermont Public Service Board over how the state’s two largest utilities will share a windfall with their ratepayers hit the Statehouse full bore in the past few weeks with a half dozen proposals in both the House and Senate that would either encourage or force the board to direct utilities to pay money as opposed to investing in an efficiency fund.
Most recently, members of the Senate have proposed an amendment to attach to this year’s energy bill that would require the department, which represents ratepayers, to re-negotiate a memorandum of understanding between the Shumlin administration, Green Mountain Power, Central Vermont Public Service Corp. and Gaz Metro (Green Mountain Power’s parent company).
Miller, whose department has been under attack from lawmakers recently, was called to the Senate floor for a special, impromptu hearing regarding the department’s recent agreement with Green Mountain Power. Miller, defended the memorandum of understanding.
Some lawmakers said they came to understand recently that the weatherization proposal brokered by the state would actually be an investment that the utilities could recoup in rates rather than spending it out of their shareholders’ pockets.
Miller cautioned the Legislature against interfering in the merger, which the utilities say will result in $144 million in ratepayer benefits over the first 10 years.
Green Mountain Power and CVPS, the state’s two largest utilities, are in what could be the final months of the approval process for their merger. The utilities have stated openly that legislative intervention in the docket could kill the deal.
“The risk I see is it absolutely affects the value of the deal as a whole from both parties’ point of view,” Miller said.
The investment, she said, though recovered in rates, will result in $25 million in benefits to ratepayers through less electricity usage as a result of weatherization and efficiency. Those benefits, she said, will last for years to come, whereas a direct refund or check to CVPS customers, which would average $76 per household, would not.
The requirement that CVPS share profits that result from a profitable merger with ratepayers is a result of a 2001 board order that allowed the utilities to increase rates due to an above-market contract they had entered with Hydro-Quebec in the 1990s. The idea was that, in any future profitable sale, the utilities would have to share benefits with their ratepayers, up to a $16 million cap ($21 million, including inflation).
The board applied the mechanism in 2007 when Gaz Metro bought Green Mountain Power and accepted a similar efficiency fund.
Miller stood her ground when senators pressed her on the specifics of the current proposal, which she said is consistent with the board’s previous orders.
She said the Legislature should see the windfall agreement as part of a larger deal that will provide lots of benefits to Vermonters.
“Vermonters need to understand the value of this merger as a whole,” she said. “There are significant savings it will bring not just in the early years. It’s not the windfall issue in itself that can be looked at separately. It would be significantly beneficial to Vermonters to approve the deal.”
Those benefits, she said, will come also from more jobs and lower energy bills.
Skeptical senators say the bid is a wash for utilities.
Sen. Mark MacDonald brought out his own makeshift “shell game” to demonstrate how the proposal is really just hiding the prize to make sure the utilities get the money and ratepayers lose out.
As he shifted a bottle cap under three empty paper cups, MacDonald explained his theory.
“There are $144 million in savings, and that’s in the deal,” he said. “The savings is for inefficiences — for things the utilities are charging more for than it costs to provide them. Whatever they charge, they’re entitled to a markup. If that much efficiency is in this deal, there has been a gross abuse of markup for the last 10 years. For those people who say these savings are going to go up in smoke, they have given the evidence after their Miranda rights have been read of all their wasteful activities.”
The current Senate proposal would direct the Department of Public Service to go back to the drawing board with the utilities and broker a deal that would require them to pay ratepayers equally — which would end up being around $150 each according to Sen. Peter Galbraith.
Under Galbraith’s proposal, if the department couldn’t reach that deal with utility, the merger could not go through.
Senate President Pro Tem John Campbell said many senators were still concerned after the meeting with Miller.
“I know many of them felt like they didn’t get clear answers today,” he said.
When asked when and how the body would introduce an amendment, he said, “we will be discussing it.”
Sens. Peter Galbraith and Tim Ashe have told VTDigger.org that one likely target would be a bill that would require utilities to purchase renewable energy through a renewable portfolio standard.
A similar effort in the House failed when that bill came up for a vote when House Speaker Shap Smith called an amendment to condition the merger on a cash payback not germane or relevant to the underlying bill.
How a similar game plan will play out in the Senate, where Campbell is more supportive of the idea, remains to be seen.
Greg Marchildon, executive director of AARP Vermont, has been outspoken about his organization’s position that ratepayers should get a cash rebate for the windfall from CVPS based on electric usage. He said the Legislature is right to question whether the current proposal is a good deal. He said the state should not be funding weatherization, which benefits homeowners, many of whom use heating fuel rather than electricity to heat their homes, through electric rates.
“It’s not taxpayer money,” he said. “It’s ratepayer money. If we’re going to start making policy on electric bills, we’re in a lot of trouble.”
