The dams are valued between $750 million and $800 million, according to Vincent Illuzzi, a former senator who testified Tuesday before two Senate committees.
TransCanada of Calgary is selling the dams to fund the $13 billion purchase of Columbia Pipeline Group, a Texas-based gas distributor. The company hopes to sell the dams by the end of the year, Shumlin said.
Shumlin said Vermont missed an opportunity when the dams last sold, in 2004, after former owner USGen New England went bankrupt and TransCanada picked up the hydropower dams for just over $500 million. Vermont at that time bid less than $400 million, Illuzzi said.
Shumlin said the purchase could help Vermont meet its “green-energy” goals while strengthening the state’s economy. He said, however, that it is up to the working group to determine whether the deal makes economic sense.
The state could purchase the dams on its own, or through a partnership with a private firm, or through several other possible mechanisms, Shumlin said.
A seven-person working group made up of energy industry experts, the state treasurer and Shumlin administration officials will come up with a recommendation within weeks to counsel lawmakers on how to evaluate proposals after legislators go home for the year in May.
Michael Dworkin, a professor at Vermont Law School and director of the school’s Institute for Energy and the Environment, is a member of the working group.
The cost of maintenance is a factor the working group needs to consider, Dworkin said. There’s no reason to think the dams’ current condition would give rise to high maintenance costs, but it’s always important “to kick the tires” in a purchase of this size, Dworkin said.
Expected wholesale energy prices for upcoming decades will constitute another important consideration for working group members to mull over, Dworkin said. Energy prices have been volatile in recent years, he said, and a forecast could be hard to pin down.
The group will also need to weigh the price that Vermonters are willing to pay for low-carbon energy, Dworkin said. If buying renewable energy is important to residents, they may willingly pay more for it, he said.
Tom Dunn, CEO of VELCO, the Vermont Electric Power Company, is another member of the working group. Power markets, especially in the Northeast, Dunn said, are complex and tricky to predict. Dunn wants to know how much cash the dams generate.
The sale of the properties twice over the course of 15 years raises questions.
The turnover is unusual because dams are typically profitable, according to water advocate James Ehlers, of Lake Champlain International.
“The private sector’s not snapping them up, so you’ve got to wonder what’s wrong with them,” Ehlers said.
The efficiency of dams diminishes over time, as sediment decreases the reservoir volume, which in turn reduces the “head,” or pressure, of the water, Ehlers said. A dam operator could reverse that effect by dredging the river, he said, but that process could stir up pollutants in the sediment, he said.
Justin Johnson, secretary of the Agency of Administration, said the most important financial concern is whether the state has enough debt capacity to support the purchase.
On the upside, State Treasurer Beth Pearce said the hydropower projects could produce a stable supply of renewable energy for the state’s residents and businesses and generate revenue for the state through energy sales.
When TransCanada purchased the dams in 2004, the 13 structures produced a total of 567 megawatts, according to company filings. That represents more than half of the state of Vermont’s estimated 1,000 megawatt power demand.
It’s uncertain whether a deal could be reached in which Vermont could buy fewer than all 13 dams, Johnson said.
Legislators finish this year’s session next month, and to complete the purchase legislators will need to pass laws giving the treasurer bonding authority and establishing a power authority. It’s possible lawmakers would need to come back for a special session if the state decided to buy the dams.
The working group includes Pearce, Dworkin, Johnson, Illuzzi and Dunn, Liz Gamache, the CEO of Efficiency Vermont, and Linda McGinnis, the program director for Energy Action Network.
