[S]OUTH BURLINGTON — The proposed cost of bringing natural gas from Colchester to Middlebury has jumped almost 80 percent in the past six months.
Vermont Gas Systems announced Friday that phase one of its pipeline extension could cost up to $154 million. That brings the total increase over its 2013 estimate of $86 million to $68 million.
Vermont Gas successfully appealed to state regulators for permission to continue the 41-mile pipeline project this summer after the first increase and intends to do so again, company officials said Friday.
“This is still good deal for the customers in Addison County and will be a good deal for the state of Vermont,” incoming Vermont Gas President and CEO Don Rendall said. “And we look forward to making that presentation and we look forward to the Public Service Board’s scrutiny of that.”
The utility also said Friday that it is putting on hold efforts to seek PSB approval of a second phase of the project that would connect Middlebury to the International Paper mill in Ticonderoga, New York. The company is reviewing the latest cost estimates for that project.
Rendall, who will assume the company’s top post in January, said Vermont Gas updated the costs using accepted industry estimating standards, as it promised regulators it would do last summer following the previous cost hike of $35 million.
The cost increase will not affect rates until the next rate year, which begins Nov. 1, 2015. The company estimated the previous cost increase would cause rates to jump about 3.6 percent in 2015. The company did not say how the latest estimate would affect rates.
The project is now estimated to be complete by early 2016, rather than the end of 2015 as previously estimated. The company has installed about 6 miles of pipeline and needs to settle property easements with about 20 percent of the landowners along the pipeline route.
Christopher Recchia, commissioner of the Department of Public Service, said the state will carefully evaluate the reasons for the cost increase and their effect on the second phase of the project. The department will make a recommendation to regulators during the review process.
AARP, a consumer advocacy organization representing 120,000 state residents, asked the department, which represents ratepayers and has long supported the project, to critically review the plan.
“The public deserves to know what the additional costs are, how they are being justified, and if the project is still viable given that the projected cost has now gone from $86 million to $154 million in just a matter of months,” said Greg Marchildon, state director for AARP Vermont, in a statement Friday.
He said customers should not be asked to pay the additional cost of the projects.
“Current ratepayers – especially seniors – should not be expected to absorb ever rising costs for a multimillion dollar project that will provide them no real benefit,” he said.
Vermont Gas said the latest cost increase was finalized earlier this week. During the previous cost estimate, the company waited months to notify regulators. The Public Service Board will investigate next year whether the delayed announcement violated state law.
Asked whether Rendall was surprised to by the new cost estimates, which he announced before assuming formal leadership of the company, he said he wants to get the project back on track.
“I was thrilled to get the opportunity to undertake this challenge,” he said. “I wouldn’t be here if I wasn’t personally committed of the advancing of natural gas service to customers, to new families and new business in Vermont where we can have the opportunities to reduce their cost and reduce their carbon footprint.”
The company estimates natural gas emits 23 percent fewer greenhouse gases than No. 6 oil, an industrial fuel source, but has not analyzed projected emission reductions for the first phase of the pipeline. On the whole, the company says the project will reduce emissions because up to 3,000 residents will convert from oil to gas, but critics say fewer residents will likely convert to gas.
Sandra Levine, a senior attorney at the Conservation Law Foundation, an environmental law firm opposing the project, said the “ballooning costs” show the project deserves careful consideration.
“Vermont, as well as the region, is in the midst of a significant transformation of its energy supply. And it becomes clearer every day that a continued reliance on fossil fuels moves us in the wrong direction,” she said. “It’s confirmation that continued reliance on fossil fuels is not only polluting but is an expensive bet. It’s really not a surprise that there is a significant cost increase.”
