The Public Service Board will hold hearings on Monday and Tuesday to decide whether the state should take away permits it gave Vermont Gas Systems to build a pipeline from Colchester to Middlebury.
At issue is whether the pipeline, which has seen cost estimate increases of 77 percent since it was initially approved by the board, will benefit the public at large.
The board issued a certificate of public good to the company in December 2013 to build Phase I of the Addison Rutland Natural Gas Project — an $86.6 million pipeline that would carry natural gas 41 miles from Chittenden County to industrial customers and homeowners in Addison County.
The board’s decision was appealed to the Vermont Supreme Court in April 2014.
Meanwhile, the cost of the pipeline has escalated and is now 77 percent higher than when the board originally issued a certificate of public good to Vermont Gas.
The Public Service Board was not notified of the higher cost projections in a timely way in the spring of 2014. The quasi-judicial board took up the matter last fall and decided to allow the project to go ahead. Now the three-member panel is evaluating the certificate of public good for the pipeline a third time, again because of cost estimate increases.
Landowner Kristin Lyons appealed the original case to the Vermont Supreme Court in April 2014, just months before Vermont Gas announced the cost of the project would be $121.6 million, or $35 million more than originally estimated.
Since then, auditors at PricewaterhouseCoopers have estimated the total cost of installing the pipeline for 3,000 customers will be $153.6 million.
And the board, once again, decided to reopen the Vermont Gas permit.
Phase II of the project would have run natural gas run from Middlebury to the International Paper mill in Ticonderoga, New York, but the deal dissolved when the paper company pulled out. International Paper, which was on the hook for the bulk of the pipeline expansion costs, didn’t re-up a contract with Vermont Gas to continue with the project because it was deemed too expensive.
Opponents of Phase I want the state of Vermont to pull the plug on the Addison County pipeline. Ratepayer advocates for the Vermont Department of Public Service, however, support the project because they believe it will help to bolster the economy.
Long-time opponents cite low oil prices, high conversion fees
Matt Cota, executive director of the Vermont Fuel Dealers Association, testified in writing against the project. He said that home heating prices are so low — and conversion costs are so high — that residents of Addison County would not see a payback on the pipeline for 33 years.
Cota said a barrel of oil cost $106 a few months before Vermont Gas got the certificate of public good in December 2013 but hit an all-time low in February. He predicted the price per barrel would stay between $50 and $70 for 25 years, putting home heating oil prices in the $2.65 to $3.10 range.
“If the cost of the two commodities remains constant, a homeowner in Addison County who converts from oilheat to utility gas in 2016 would have to wait … to the year 2049,” Cota wrote to the board.
In an interview, Cota said Vermont Gas has been ignoring how much it would cost Vermonters to change their home heating systems from oil or propane to natural gas.
“Our interest is to ensure that when comparisons are made between competing fuels, that we have a level playing field,” Cota said.
He testified that the average cost for materials and labor is in the $12,372 range but can be as high as $18,000. The estimates include removing the house’s oil tank, removing the oil itself from the tank, removing the vent, and lining the house’s brick chimney if it has one.
“In Vermont there’s no shortage in ways to heat your home, and the cost of the commodity, the cost of the fuel, is just one part of the equation,” he said.
The AARP hired an economist who said Vermont Gas has overstated energy savings and environmental benefits from the project. The economist, David Dismukes, said Vermont Gas failed to account for capital investments, to account for rate impacts, and failed to calculate reduced economic activity from switching to natural gas from oil and propane. Dismukes said the pipeline would therefore cost the Vermont economy $200 million and called Vermont Gas’ testimony “a one-sided economic impact analysis that focuses exclusively on the project’s benefits and none of its costs.”
Greg Marchildon, executive director of AARP Vermont, said the company “essentially looked at all the potential good outcomes” and the Public Service Department trusted that information without verifying it.
“The people who are supposed to be looking out for ratepayers in the state at the [Public Service Department] are not doing due diligence and not getting the job done,” Marchildon said. “The public is extremely frustrated with the way this has all gone down.”
Louise Peyser, a landowner in Monkton whose daughter Melanie Peyser has been advocating for landowner rights along the pipeline route, wants the Public Service Department to appoint independent counsel to represent the public in the wake of what they consider to be inadequate representation from the state.
Monkton landowners Jane and Nathan Palmer and landowner Kristin Lyons are also part of the proceeding. A full list of party arguments is available on the Public Service Board website.
State and company reiterate support for project
The public advocate for the Public Service Department said in prefiled testimony that the state’s new economic modeling shows the project will have a net benefit to Vermont.
“We feel that the project is still beneficial, though certainly not the magnitude of benefits that were originally proposed,” said Chris Recchia, commissioner of the Public Service Department. “It is still net positive and at a reasonable margin.”
Recchia said delaying pipeline construction would increase the costs for ratepayers. He defended the department’s representation of the public interest in the face of calls from the Peysers to appoint an independent counsel to represent the public.
“We think we’ve done an outstanding job representing the public at-large and Vermonters at-large, of all interests,” Recchia said. “We are not representing individual property owners. On the other hand, we did go through a very large effort to address property concerns.”
Company executives at Vermont Gas testified in writing in support of the Addison Rutland Natural Gas Project and responded to allegations that other parties in the case raised.
Eileen Simollardes, one of the company’s vice presidents, said AARP’s allegations that the pipeline would put oil providers out of work relies on a “flawed assumption that job displacements will remain permanent.” Additionally, she said the VFDA “grossly overstates the cost of conversion.”
Beth Parent, spokesperson for Vermont Gas, called natural gas “the cleaner and more affordable home heating option” as compared to oil and propane. The company says its customers have had their rates decline by 15 percent since 2012, and that people who convert save around $2,000 per year.
“We receive calls and emails from folks in Addison, Chittenden, and Franklin counties every day asking when we are coming to their towns or communities,” Parent said. “This company is committed to bringing the benefits of natural gas to even more communities and that is just what this project will do.”
The average prices of oil and propane on Friday were $2.67 and $2.50, according to an online savings calculator from Vermont Gas. For a home that uses 600 gallons of oil per year, the company predicts a 23 percent savings on home heating costs, not including conversion.
Vermont Gas has signed memorandums of understanding with the following 11 parties: the Monkton Central School, the town of Monkton, the Addison County Regional Planning Commission, the Agency of Agriculture, the Vermont Land Trust, the Vermont Housing and Conservation Board, the Vermont Agency of Natural Resources, the Chittenden Solid Waste District, and the Vermont Electric Power Co., also called VELCO.
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