[T]he Vermont Supreme Court has told the Public Utility Commission to do a better job justifying the penalty it assessed against Vermont Gas Systems for imprudent spending on the gas company’s Addison Natural Gas Pipeline project.
James Dumont, representing the AARP in the appeal to the state high court, had argued that the commission had been too lenient in its response to overruns that nearly doubled the cost of the pipeline project, from $87 million to $165 million.
The Public Utility Commission and Vermont Gas agreed in a memorandum of understanding to cap the amount the company could recoup at $134 million, an amount the AARP argued was still too high. The three-member Public Service Commission approved the memorandum of understanding — a decision the high court said the commission reached without sufficient reasoning.
On Friday the state Supreme Court ruled that the drastic increase in construction costs of the 41-mile natural gas pipeline did not amount to a “substantial change” to the project, and therefore Vermont Gas did not have to repermit the pipeline.
That decision allows the company to avoid a time-consuming and costly public process that almost surely would have added years to the project, as well as the possibility of lawsuits from those opposed to the pipeline extension into Addison County.
Vermont Gas, a public utility owned by Canadian fossil fuel giant Énergir, obtained a certificate of public good permit for the pipeline in 2013. Despite the near doubling of the cost of the pipeline, the Public Utility Commission had held there was not a “cognizable change” to the permit’s terms.
The high court’s decision on Friday upheld the commission’s ruling, which had been appealed by the Conservation Law Foundation.
It is not out of the ordinary for utilities to ask state regulators for permission to pass on construction costs to ratepayers.
Much of the debate in this case has centered on whether the company should be allowed to bill current customers for a pipeline that would benefit future customers.
Dumont, on behalf of AARP, has argued that much about the project has been imprudent. For example, he said, Vermont Gas allowed Over and Under Pipeline Contractors to begin work before signing a $45 million contract for the work.
“The single largest contract for this project was a $45 million contract with the Over and Under pipeline construction company,” Dumont said. “The contract was many, many, many, many pages long, and it was never signed by Over and Under. But Vermont Gas said, ‘We want to get this thing started, so we’re going to authorize Over and Under to start constructing under its $45 million contract, even though they haven’t signed the contract’.”
He added, “Making this even more astounding, the Vermont Gas person who made that decision testified (that) she had never read the contract.”
The high court did not address how much of the cost overruns Vermont Gas should be allowed to recoup. “If you look at the evidence in the case, there’s no way it could go higher,” Dumont said.
Speaking for the company, Parent said, “We appreciate the thorough review from the Supreme Court. We’re focused on moving forward. We’re focused on working with the PUC to resolve this matter.”
Still awaiting resolution is the question of whether the company used inappropriate construction practices along much of the pipeline’s length. The PUC ordered an investigation of the entire pipeline earlier this month.
