The Shumlin administration maintains that the Vermont Gas pipeline is a good deal for the state, even with a new higher price tag.
The Department of Public Service (DPS) told regulators on Thursday not to re-evaluate the pipeline despite a 40 percent projected cost increase announced by the company this summer.
The department says a fresh review is not necessary because the “significant benefits associated with the project continue to outweigh the costs.”
The Vermont Public Service Board is expected to decide whether to reopen the docket next week or send the case back to the Vermont Supreme Court, which ruled in September that the case could be reopened.
The PSB approved the company’s 41-mile pipeline from Colchester south to Middlebury last December. But in July, the company increased its estimate by $35 million, largely due to nationwide competition for natural gas construction.
Pipeline opponents seized on the July cost increase to call on the PSB to reconsider the project. The Conservation Law Foundation, later joined by other opponents, asked regulators to halt construction until the new cost estimates were evaluated.
But DPS told the Board that no parties in the case provided evidence that the new costs would reduce the economic benefits of the project.
Sandy Levine, a senior attorney with the Conservation Law Foundation, which is opposing the pipeline, said that key cost issues were not included in the “rosy” economic analyses by the department and Vermont Gas.
Vermont Gas says the Phase One project will serve up to 4,000 potential customers, but opponents say cost-competitive air source heat pumps, which use electricity to heat and cool homes, could take potential customers away from Vermont Gas.
“The analysis from both Vermont Gas and the Public Service Department failed to include critical information that undermines their claims,” she said.
Matt Cota, executive director of the Vermont Fuel Dealers Association, a trade group that stands to lose market share to natural gas, said heat pumps may be a better alternative for residents considering converting their oil furnace to natural gas, which he said can cost up to $10,000.
“At the end of the day, customers are going to have another choice. But that doesn’t mean they are going to choose natural gas,” he said.
Don Gilbert, president and CEO of Vermont Gas, told the PSB last week that heat pumps can work in tandem with natural gas. He said natural gas can provide a backup heat source during cold weather. Heat pump proponents say the technology generates heat in temperature as low as -18 degrees Fahrenheit.
The DPS said air source heat pumps still require a backup heating source, and cannot be used to meet industrial or commercial heating needs.
Vermont Gas says the project will generate $2.4 million per year in property taxes; save Addison County residents and businesses $195 million over the next 20 years; reduce carbon dioxide emissions; and result in trickle-down economic benefits.
Eileen Simollardes, vice president of regulatory affairs for Vermont Gas, said the cost of the project could increase further.
“I don’t want to say that this project is going to cost $121.6 million. I just don’t know that. It’s not built yet. There could be more costs in there,” she told the board last week.
Nonetheless, Simollardes said the project is more mature than is was previously. The company has secured a contract for the pipeline construction, the chief factor in the new cost estimate.
AARP, a membership organization representing 120,000 state residents, including some Vermont Gas customers, is not convinced the price will remain the same.
Clough Harbor and Associates, engineering consulting firm headquartered in Albany, New York, had been the company’s lead project manager. Vermont Gas reduced the firm’s role to engineering and surveying contractor.
AARP says the new Vermont Gas team has not yet developed new cost estimates, and asked the board to require Vermont Gas to provide new estimates prepared by experts other than Clough Harbor and Associates.
The cost of the pipeline will not affect rates for the following rate year, which will begin on Nov. 1.
Vermont Gas estimates that rates will jump about 3.6 percent in 2015 — assuming the company uses about $15 million it has already collected from customers and reserved in a special fund designed to smooth the rate impact associated with the project. The rate adjustment will be reviewed by regulators.
