PSB takes another look at Vermont Gas pipeline project

Don Rendell, president and CEO of Vermont Gas Systems. Photo by Erin Mansfield/VTDigger

Don Rendall, president and CEO of Vermont Gas Systems. Photo by Erin Mansfield/VTDigger

Witnesses for Vermont Gas Systems faced detailed questions on Monday from a state board that will determine whether the company’s permit for a 41-mile pipeline project should be reopened.

It was the first day in a two-day process that is scheduled to end Tuesday afternoon. The Public Service Board, which regulates utilities, is re-evaluating a December 2013 decision to grant Vermont Gas a permit for Phase 1 of the Addison Rutland Natural Gas Project, which would run from Colchester to Middlebury and serve about 3,000 customers.

The board has the power to halt the pipeline construction. At issue is the escalating cost of the pipeline, which has increased from $86.6 million to $153.6 million.

That increase prompted the Public Service Board to take another look at the company’s certificate of public good. The Public Service Department, which represents ratepayers in utility matters, reiterated Monday that it would pull Vermont Gas through a rate case if the company completes the project and tries to recover any of the price increases from ratepayers.

“The fact that the price of the project has gone up does not automatically mean that rates will go up,” said Chris Recchia, commissioner of the Public Service Department. Witnesses from the department are scheduled to testify Tuesday.

On Monday, lawyers for private nonprofit organizations and individual landowners led a tense grilling of representatives of the natural gas company during an eight-hour process, pecking away at the company’s arguments that building the pipeline would improve Vermont’s economy.

The daylong debate, marked by intense questions from AARP’s attorney Jim Dumont, touched on the oil market, methane emissions, mathematical processes for construction planning and the company’s credibility after announcing two price increases in six months.

Eileen Simollardes, a vice president at Vermont Gas, waits to testify. Photo by Erin Mansfield/VTDigger

Eileen Simollardes, a vice president at Vermont Gas, waits to testify. Photo by Erin Mansfield/VTDigger

Eileen Simollardes, a vice president for Vermont Gas, testified that distribution to customers in Middlebury and Vergennes is assumed to be a flat $5.8 million plus $1,600 per customer hookup. But as the activist group Just Power wrote on its Twitter account, based on those estimates, the total cost would be $159.4 million, not including customer connections, or $164.2 million assuming 3,000 of hookups.

Vermont Gas officials objected to that assertion.

“It would be misleading to take from [Dumont’s] comments that the cost has increased again,” said Don Rendall, chief executive officer for Vermont Gas. “The costs we’re talking about here [are the] costs to build the transmission backbone of the pipeline to Middlebury.”

Rendall commended the Public Service Board members for asking hard questions on behalf of the public. Tuesday is scheduled to be Vermont Gas’ opportunity to examine witnesses brought by the Public Service Department, the Conservation Law Foundation, the AARP and others.

The economic arguments

The company announced its $153.6 million estimate in a December news conference, after Rendall and other new leadership took over and vowed greater transparency. But the company faces accusations that it uses economic models that paint too rosy of a picture for the company.

Dumont is the lawyer who appealed the original certificate of public good to the Vermont Supreme Court on behalf of landowner Kristin Lyons. He said economic benefit is not the right reason to approve a natural gas pipeline, but he looked into the numbers from Vermont Gas and the Public Service Department — and said he disagrees that there would be an economic benefit.

Jim Dumont

Jim Dumont is an attorney from Bristol representing AARP. File photo by John Herrick/VTDigger

“The [Public Service Department] has justified this project on the basis that it creates a net economic benefit to the state,” Dumont said. “That’s not what rates are for. That’s not what the Public Service Board is for.”

Dumont hired outside expert David Dismukes to question Vermont Gas’ economic reasoning on behalf of AARP to attempt to dissolve the company’s arguments.

Dismukes argues in his prefiled testimony that fuel dealers would be put out of business, taking jobs for oil and propane delivery truck drivers with it.

“Assuming you want to use this logic, once you put a pipeline in the ground, you don’t have any more jobs,” Dumont said. “There are construction jobs, and then the jobs go away. All of the fuel dealers and the construction companies, they don’t have jobs anymore.”

Richard Heaps, the economist for Vermont Gas, disagreed. Heaps said Dismukes’ analysis was based on a faulty premise that people will be unemployed for a long period of time.

“There will be some disruption, and people will have to move from the jobs that they had with the fuel dealers to jobs in a new industry,” Heaps said. “The economy’s doing quite well, so people will be able to move and find new jobs.

“We’re growing faster than the rest of the state [in Chittenden County],” Heaps said. “No Chittenden County resident has been harmed by the expansion of the pipeline, by the expansion of these other types of businesses.”

Plummeting oil prices

Dumont presented oil market information from the International Monetary Fund, the World Bank and Goldman Sachs to Heaps, who responded that he doesn’t read that information regularly. Heaps said the price for a barrel of oil was about $60 on Monday, and he expects the price to shoot up in the next three years.

Matt Cota, executive director for the Vermont Fuel Dealers Association, disagreed. He said there is a large supply of oil in the market today, and the conversion cost of moving from oil to natural gas is not worth it based on what he knows about oil futures.

“There is data out there that shows we’re not going to see a rebound in prices; we’re going to see a depression in prices because there’s so much oil on the markets today,” Cota said. “There are many predictions that are on the opposite sides of Mr. Heaps’ prediction that say oil prices are going to go to $30 a barrel or $40 a barrel.”

Rendall said, “We’re not in the business of predicting oil prices, and that’s because the predictions have been so consistently wrong. The important thing here is that we have something that gives customers another choice. The important thing is that we give them a reliable choice for something that has regulated pricing.”

Demonstrators from Rising Tide Vermont and the Vermont Workers Center gather at the Public Service Board building in Montpelier. Photo by Erin Mansfield/VTDigger

Demonstrators from Rising Tide Vermont and the Vermont Workers Center gather at the Public Service Board building in Montpelier. Photo by Erin Mansfield/VTDigger

 

Environmentalists look on

While lawyers engaged highly technical conversations, environmentalists looked on in silence with signs that warned about methane emissions from fracked natural gas and rate impacts on senior citizens.

Just after the official hearings ended, Rising Tide, Just Power and other activist groups were beginning a planned all-night protest outside the Public Service Board’s headquarters at 112 State St.

Starting around 4:30 p.m., about 100 protesters marched around the building. They planned a “truth-in” vigil to start after dark in observance of people around the world who have lost their homes as a result of fracking.

Vermont banned fracking several years ago, but there is no state law that prohibits building infrastructure for natural gas, some of which comes from fracking.

“You can’t unring the bell,” said Mary Martin, a landowner in Cornwall who had opposed Phase II of the Addison Rutland Natural Gas Project. “Once you’re made aware of what’s going on with global climate change, you can’t go back on it.”

Anna Rose, 21, of Burlington, was one of the many organizers of the event. “I’m a Vermont Gas customer, and I’m particularly concerned about the ratepayer impacts. Gas prices are already too high.”

Alex Prolman of Burlington said about three dozen protesters would camp out between 110 and 112 State St. The group did not have a formal permit to be there but did not plan to resist arrest.

“The reason [the Public Service Board is] at this remand process is because of many years of fierce public opposition,” Prolman said. “It makes it much harder for them to grant a certificate of public good when the public is saying very loudly this is not good.”

Erin Mansfield

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  • Annette Smith

    Thanks Erin and vtdigger.org, for a good report. And with the Burlington Free Press’s live video streaming the public is getting a rare view of the Vermont Public Board technical hearing process.

    It can be an odd experience if you are not familiar with the documents the witnesses are referring to. There is no direct testimony at the Public Service Board, that is all pre-filed in writing, often with one or more rounds of discovery. The full docket for this phase of the pipeline is here http://psb.vermont.gov/docketsandprojects/gas/7970/main

    The PSB is doing a better job than in most cases in updating the website with submissions by all the parties (in most dockets they post the applicant’s submissions but not the other parties). There is a separate page for the remands. This is the second remand and those files are on this page http://psb.vermont.gov/docketsandprojects/gas/7970/Remand.

    To follow along on Tuesday if you watch the BFP live video stream you can, at the same time, find the testimony they are referring to.

    Now imagine you are a Vermonter happily living your life building a business like the organic farm of your dreams, right next to a federally protected wetland, and along comes the pipeline disrupting your peaceful life for three years, yielding a pile of paper taller than you.

    And now you’re sitting in the PSB hearing room. Again. On your own nickel. While VGS works to persuade you to take their nickel so they can put their pipeline way too close to your house (to avoid that federally protected wetland which would require a permit).

    VGS chose a route through rock and water. That is the story of the western corridor, the reason we do not have an interstate. If VGS continues, there will only be higher costs as they do not even have a contractor. It is easy to lay a pipeline 6 feet deep through fields of soil. It is not so easy to blast a pipeline through rock and water, with people’s water supplies nearby. Bad route. Cut your losses.

  • Randy Koch

    This article states: “The Public Service Department, which represents ratepayers in utility matters, reiterated Monday that it would pull Vermont Gas through a rate case if the company completes the project and tries to recover any of the price increases from ratepayers.”

    I wish vtdigger would provide a little background on this explosive comment by the bureaucracy whose duty is protecting the public’s interests.

    As I understand it, a “rate case” means a full audit of the utility seeking a rate increase. Are the company headquarters really pleasure domes inappropriate for a “regulated” monopoly? Are all of the other costs alleged legitimate? Without close supervision of costs, these legalized monopolies could charge whatever they wanted.

    As I understand it, there has not been a full rate case for decades, not even on the occasion of the epic merger between GazMetro/GMP and CVPS. Nobody at the Board or Department even knows how to carry one out. Instead the PSB, DPS, and utilities have collaborated to avoid close regulation using “alternative” models.

    We need to demand that the “public” be put back into “public service” and the cozy “capture” of our regulators by the utilities be unceremoniously ended.

    We need to demand that there be a full, detailed audit of GazMetro’s doubtful numbers and that “rate cases” be the standard method again whenever rate increases are requested and not an empty threat held over the utilities’ heads .

  • Jed Guertin

    The real question is “Has the PSD become a revolving door?”

    VT Gas will find a way to charge their customers for their $70,000,000 mistake.

  • Jane Palmer

    “Rendall and other new leadership took over and vowed greater transparency…”
    Here is an example of that “greater” transparency….the Spokesperson for Vermont Gas…refusing to answer questions about rate increases..

  • Jane Palmer

    Mr Rendall says, “We’re not in the business of predicting oil prices, and that’s because the predictions have been so consistently wrong. The important thing here is that we have something that gives customers another choice. The important thing is that we give them a reliable choice for something that has regulated pricing.”
    Yet predicting is exactly what Vermont Gas is doing. They have done no studies or surveys to determine at what price differential new customers would commit to converting to gas from other fuels. VGS used a PREDICTION by their marketing department on what the demand would be in Addison County based on other areas…like Richmond that had a “robust”uptake in gas conversion…mainly where Tropical Storm Irene took out the heating systems that were located in the basements of all those flooded by the storm..and at a time when the price of fuel oil was substantially higher than it is right now. Seriously…this is how they calculated demand. They refuse to admit that the climate (forgive the pun) has changed for “natural” gas and it is not such a sweet deal anymore. Add to that the rate increases that will inevitably come in order to pay for the enormously expensive pipeline VGS so desperately wants to build and the demand for these “choices” Mr Rendall is talking about vanishes into thin air.

  • Randy Koch

    Absolutely amazing and revealing video! The Mary Powell-type masks slips and the real face of Gaz Métro, rich with Stephen Harper, rightwing authoritarianism is there on display. When you own all the marbles you make all the rules.

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