Energy & Environment

Vermont balks at using ratepayer money for transmission build-out

New England governors recently renewed a pledge to address what many describe as an energy crisis causing double-digit electricity rate increases across the region.

Proposed solutions to increasing electricity demand in southern New England include building new transmission lines to carry Canadian hydropower south and natural gas pipelines to feed high winter demand. For more than a year, the six states have discussed ways to split the cost of these projects.

Department of Public Service Commissioner Chris Recchia was elected chair of the Nuclear Decommissioning Citizens Advisory Panel in Brattleboro on Thursday.  Photo by John Herrick/VTDigger

Department of Public Service Commissioner Chris Recchia. Photo by John Herrick/VTDigger

During a news conference at the Connecticut Convention Center in Hartford following a private roundtable discussion last week, no funding proposals were announced.

While southern New England states commit to make ratepayer money available to help pay for private infrastructure investments, Vermont officials said they would not.

Vermont, which regulates the electricity industry differently than its neighbors, is not as affected by the natural gas price spikes experienced by the rest of New England.

“Vermont has been clear that we don’t think we should be paying anything toward the electric transmission or the gas transmission,” Department of Public Service Commissioner Chris Recchia said. “We will not benefit from a gas pipeline. The transmission one is a little bit more complicated.”

But Vermont could help other states with energy efficiency, Recchia said. Through greater energy efficiency measures, utilities could avoid purchasing additional electricity and transmission infrastructure, Vermont officials say. Recchia promoted the concept during last week’s meeting, but no new commitments by other states were made.

Utilities in New England have announced electricity rate hikes between 30 percent and 50 percent, in part due to spikes in the price for natural gas. Demand for natural gas has increased, but pipeline infrastructure has not. In the winter when gas is also used for heating, operators of gas-fired power plants pay high prices for limited supplies.

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Vermont has not been affected much by these price spikes, Recchia said. He said Vermont saw a 2.4 rate percent decrease last year, in part because the state has been building local renewable energy generation and reducing demand through energy efficiency.

Since 2011, the state has avoided about $400 million in planned transmission upgrades largely because of energy efficiency programs and small-scale renewable energy generation, according to a 2014 memo by VELCO, the state’s transmission utility. These costs would have been split among the region, and would cost Vermont nearly $16 million.

Michael Dworkin, a professor of law at Vermont Law School and director of the Institute for Energy and the Environment, said Vermont has reduced electricity demand by about 13 percent over the past decade, largely due to energy efficiency measures.

“It’s avoiding power costs. It’s avoiding transmission lines that would otherwise be needed. And it’s reduced the total New England share of the cost that we will be on the hook for,” Dworkin said of Vermont’s energy efficiency programs.

New England states split the cost of reliability projects based on their total electricity load. Vermont accounts for about 3.5 percent of the region’s total electricity demand and pays an equivalent proportion for grid reliability upgrades across the region.

Approximately $4.5 billion in transmission investment is projected through 2018 to meet reliability requirements, improve the economic performance of the system and position the region to integrate renewable resources and alternative technologies, according to ISO New England, the region’s grid operator.

If those projects were approved, Vermont ratepayers would pay about $157.5 million over the next five years.

Recchia said the governors discussed this problem but no decisions were made.

A statement released by the six governors includes language about how “energy challenges” in the region can be solved with clean energy investments. The statement warns that the region’s electricity infrastructure faces “reliability” issues.

“The economic, system reliability, and environmental consequences of inadequate energy infrastructure require action. Cost-effective investment in new natural gas infrastructure and the continued integration of clean energy resources are important to resolving these challenges,” the statement reads.

Options to address this concern include new transmission lines that would carry hydropower from Canada to Massachusetts, Connecticut and Rhode Island. Those states have released a draft request for proposals from private developers to build transmission lines and renewable energy projects. Cost recovery proposals would require state and federal approval.

Previously, all six states wanted to come up with a funding scheme to support these projects. Recchia said the governors have “kind of given up on that idea.”

TDI New England, a transmission line developer backed by the New York global investment firm Blackstone Group, is seeking permission from state regulators to build a $1.2 billion, 154-mile transmission line that would pass underneath Lake Champlain and then underground.

The company would finance the project itself. It is offering the state a $298 million benefits package over 40 years, including $122 million for Lake Champlain pollution cleanup and habitat restoration efforts.

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Recchia said the state has not taken a position on the project. He said the state considers the regional benefits of a project when deciding whether to permit a project, such as greenhouse gas emission reductions.

“But clearly the project has to be beneficial to Vermont,” he said.

He said he is discussing how to estimate the cost of transmission lines with other states. Recchia said transmission line projects often cost two to three times more than originally estimated.

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