Are Utility Bills 'So High' In Vermont? It's (Really) Complicated

Oct 7, 2016

This month on Brave Little State, VPR's people-powered journalism podcast, a question about utility bills in Vermont — and a small sampling of Vermont ghost stories.

Our primary question for this episode came to us from Dave Reville, from Burlington. We buttonholed him at a station event last spring, and he wondered:

"Why are utility bills so high in Vermont, and what the heck are all those obscure line items and charges on our gas bill and our electric bill?" - Dave Reville, Burlington

But first, a big disclosure: If you check out our homepage, you’ll find that Brave Little State has a policy of not accepting questions that pose an obvious conflict of interest. Part of the reason we now have that policy is due to how this month’s story came about.  

Dave Reville, our question-asker, is the communications director for AARP Vermont (meta-disclosure: AARP is a VPR underwriter). The AARP regularly advocates for lower utility rates in Vermont, and lobbies in Montpelier. When we put this question up for a public vote, we didn’t realize who Dave was, so we didn’t catch this conflict of interest. That was our fault. But we decided to answer the question, anyway, because it got the most votes from you — our audience — as something we should cover.

We should start by saying that, when we say “utilities,” we’re talking only about electricity and natural gas for this story. These the only two fuel sources that are technically utilities in Vermont, because they’re allowed to have monopolies in their market and state regulators have a say in setting their rates.

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Electricity: The short answer

Vermont’s average monthly electricity bill is actually lower than the national average, and Vermont usually has some of the cheaper bills in New England. This is because we don’t consume much electricity, thanks to our relatively mild summers and well-established energy efficiency programs.

But the price of electricity in New England generally is higher than anywhere else in the continental U.S. That’s because we don’t have the fuels needed to generate electricity ourselves, so we have to import most of our power, which is more expensive. We’ve also prioritized pricier, renewable sources of power over cheaper, dirty power, which costs more up front, even if it saves money in the long term and is better for the environment.

Once the power gets to Vermont, it also costs more money to distribute it to our mostly rural, low-density population, and there fewer big consumers (like factories) to help offset those costs.

Electricity: The longer answer

Vermont’s average residential electric bills actually are not “so high” — at least, not when you compare them to bills in other parts of the country, which Dave later clarified is what he was curious about.

Vermont’s average monthly electricity bill was lower than the U.S. average between 2004 and 2014 — on average, about $15 a month cheaper, according to data from the U.S. Energy Information Administration. In 2014, the average residential monthly electric bill in Vermont was $99.34, compared to $114.09 for the U.S., and $112.31 for the New England region.

Bills in Vermont are below average because Vermonters, per capita, are among the smallest consumers of electricity in the country. Part of this is climate: Vermont doesn’t get too stifling in the summer, so we don’t run our air conditioners as much as, say, Floridians. Vermont also created a first-in-the-nation energy efficiency program in 1999, and consumption has steadily declined since then.

Curious about your own bills? We break it down, charge by charge, here.

High prices on the “Electricity Superhighway”

Electricity bills may be low because Vermonters don’t consume much.

But electricity prices in Vermont — and in all of New England — are among the highest in the continental U.S. (If that sounds confusing, think of it this way: The price of something can be expensive, but if you don’t use much of it, it won’t cost you much.)

Average residential electricity prices in Vermont were higher than the U.S. average between 1999 and 2014, according to the EIA. Vermont’s prices were nearly 40 percent higher in 2014. New England prices have also been markedly higher than the U.S. average.

To understand why, it helps to think of New England’s electric grid as a system of highways and roads, said Matthew White, the chief economist at ISO New England.

“We’re making sure that everybody who’s using it is respecting the weight limits of the highway, and that things are going where they need to go,” he said. ISO New England is a nonprofit that oversees the marketplace for wholesale electricity in New England, then monitors the transmission of the power to individual states.

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Three-quarters of electricity Vermonters use is generated out-of-state, which means it has to be transported over long distances to get here. That’s called “transmission”: a system of high-voltage, high-speed power lines that run from generation plants into states all over New England, like an “electricity superhighway,” White said.

Once electricity gets to Vermont, local utilities pay a toll for the power at one of a series of thousands of exit ramps, onto the side streets, which is called “distribution.” Utilities might own and operate these side streets (really, poles and wires) that bring power up to your home.

“That’s when I take the energy, that high-voltage energy, I take it off of of the interstate highway ... and I go onto the roads and lanes and streets that take me directly to the customer’s house or business, where they’re actually consuming the power directly,” said Charlotte Ancel, vice president of power supply at Green Mountain Power, an investor-owned utility and the state's largest electricity supplier. GMP serves about 71 percent of electricity customers in Vermont.

Prices on the highway

One reason Vermont electricity is so expensive is because we’re at the end of the energy pipeline, White said, and we rely on fuels from other places to generate our power.           

“Illinois is sitting on reams and reams of coal,” he said. “The upper Midwest has a ton of oil. In Ohio and western Pennsylvania, they sit on enormous reserves of shale gas. New England has none of those, so everything has to be transported in.”

That transmission costs money. For one thing, power gets lost in the transmission process — and more power gets lost the farther it has to travel. Utilities also pay ISO New England for using the highway.

Also, New Englanders end up paying for the transmission system itself that brings the power to them.

There’s been much debate over these upgrades, but the upshot is: Those costs have spiked in the last few years, according to data from ISO New England, which maintains the transmission system. Infrastructure costs have increased by about 150 percent between 2008 and last year.

Electricity “side streets” ... or “dirt roads”?

Utility leaders, industry experts and state regulators say another driver of costs in Vermont is distribution — that is, the cost of building and maintaining the poles and wires to bring power to customers. Vermont’s landscape makes this more difficult and more expensive — to string power lines over mountains and into valleys and through forests.

Once the electricity is distributed throughout Vermont, it’s likely that it will serve a relatively low-density population, said Christine Hallquist, CEO of the Vermont Electric Cooperative, a non-profit, member-owned utility that serves about 32,000 customers in northern Vermont.

And that also ends up raising prices.

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“You've still got to build a mile of power line,” said Hallquist. “If that mile of power line is supporting 15 customers, versus 150, the individual cost per customer goes up significantly.”

Vermont also has relatively few big power consumers, such as factories or corporate parks, to help offset those costs.

Efficiency and renewables: Spending money to save money?

New England has been more aggressive in its efforts to curb climate change than other parts of the U.S., but that also contributes to higher electricity prices here, said White, with ISO New England.

“New England long ago made a commitment to ... trying to clean up the environment, to doing a better job of weatherizing homes for low-income households, and to broadly promoting what the industry calls ‘energy efficiency.’”

Vermont utility customers can find an energy efficiency charge right on their monthly bills. The state-mandated fee is based on energy consumption. So while Vermont’s electric bills are relatively low (because Vermonters have learned to use less electricity), the programs can drive up the price of electricity region-wide, in order to cover the costs of those programs, White said.

Another price factor is Vermont’s push to get electricity from clean sources, rather than cheaper, dirtier ones. GMP, the state’s biggest power provider, has no coal in its portfolio, for example, because that’s what its customers want, said Charlotte Ancel, the GMP vice president. But that also drives up costs, she said.

As a state, Vermont gets almost none of its power from coal, and New England gets just about 4 percent. Vermont has also set ambitious renewable energy goals in recent years.

“As a state, we’ve made a very conscious, overt, directed push toward renewables. And we ultimately have had to subsidize [them] in order to get them stood up,” said Neale Lunderville, general manager of the Burlington Electric Department, a city-owned utility. “There’s a cost to that that gets borne by ratepayers.”

Meanwhile, advocates encourage Vermonters to think long-term about renewable energy.

“Compare it to an energy-efficient light bulb. That may be a slightly more expensive up-front cost, but it lasts longer ... and uses less electricity,” said Sandra Levine, a senior attorney with the Conservation Law Foundation in Vermont, an environmental advocacy group. So over the lifetime of that light bulb, there’s significant savings to the customer. The same is true with renewable energy for Vermonters and for all of New England.”

Vermont bills relatively cheap?

Compared to other New Englanders, Vermonters’ electricity bills have been on the cheaper side in recent years.

One reason is the maturity of Vermont’s efficiency programs, say regulators and industry experts. They’ve now been around long enough that Vermonters are seeing the benefits on their bills.

Another part of the reason could be one effect of Vermont’s regulation system, said Asa Hopkins, the director of the Planning and Energy Resources Division at the Vermont Department of Public Service, which is charged with representing the public interest in the utility regulation process.

The system encourages Vermont utilities to buy longer-term power contracts, which means customers don’t feel the ups and downs of the market as much.

“So at times when the wholesale market is really expensive, we only see a relatively small impact from that,” said “Other states see that a lot more than we do.”

But other utility leaders say that can cut both ways: When market prices are cheaper, Vermont utilities can be locked into long-term power contracts that don’t let them take advantage of a dip in the wholesale market.

Either way, Vermont’s electricity prices are traditionally much more stable than in other New England states.

What about natural gas?

The short answer: Vermont’s average residential natural gas bills are higher each year than almost anywhere else in the United States. This is partly because the few Vermonters who get natural gas — about one in six — use a lot of it during our cold winters. Also, the price of gas itself in Vermont is high because we pipe it here from very far away, which costs money. And once it gets here, it’s mostly used by people in their homes, and there aren’t a lot of big industrial customers to help offset all those costs.

The longer answer: Vermont Gas Systems, Inc., an investor-owned utility, has a monopoly on natural gas supply in Vermont. But it has plenty of other competitors for home heating options, from wood pellets to heating oil to propane, and others. (Again, natural gas is the only one of these fuels the state regulates as a “utility,” which is why we’re examining the gas market in this post, but not the markets for the other heating fuels.)

Like electricity, the natural gas delivery system has its own highway and side streets, but it’s a lot simpler than the one for electric power because there are fewer players involved.

But unlike electricity, Vermont has had some of the highest natural gas bills in the country in recent years.

Between 2009 and 2014, Vermont’s average annual residential natural gas bills have been the second highest in the U.S., according to data from the American Gas Association, a pro-gas industry trade group. In 2014, for example, Vermont’s average residential gas customer spent $1,330 on bills, second only to Maine, according to AGA data.

One big reason: winter.

“As Vermonters, you folks are really familiar with cold weather,” said said Tom Kiley, president of the Northeast Gas Association, a regional industry group. “In a typical winter, you’ll use more gas in the Burlington, Vermont area, for instance, than customers down in Boston, Massachusetts, because you’re colder.”

Indeed, the average Vermont residential customer uses more gas than your average New Englander, and they’ve ranked near the top of the region’s consumption since 2008, according to the AGA. Over that time, per-customer consumption in Vermont has also remained in the top 20 nationwide.

Another big reason for Vermont’s high natural gas bills is that the gas itself has to travel a long way to get here, which drives up its cost. All of Vermont’s natural gas is piped in from Alberta and Ontario through the TransCanada pipeline (the super-highway), and once it crosses the border into Vermont, the distribution pipes (the side streets) are owned and operated by the state’s only natural gas utility, Vermont Gas Systems.

“We are literally the last stop on that pipeline,” said Eileen Simollardes, the vice president of regulatory affairs at Vermont Gas. “There isn’t anybody further away than we are at that point.”

TransCanada is the only pipeline that brings natural gas to Vermont. That contributes to the higher prices here, Simollardes said, because the company doesn’t have the option of buying gas from another pipeline that might have cheaper prices.

In 2014, Vermont had the eighth-highest residential natural gas prices in the country, at $14.30 per million BTUs, according to AGA data. That was about 35 percent higher than the national average of $10.56.

And once it finally gets here, there’s a relatively low-density, residential customer base to help spread around those costs.

“If you’ve got a fixed infrastructure business, which we are, there’s pipes in the ground, and you’ve got to maintain them, you’ve got to cover the cost of those,” Simollardes said. “It’s far easier to do that over a lot of large industrials than small residentials.”

Simollardes cautioned against comparing Vermont Gas rates to other utilities “because it’s really not apples-to-apples,” she said.

“I don’t know that our customers say, 'Oh my gosh, I’m paying more money than somebody in Chicago or Tampa or even Hartford,’” Simollardes said. “Our customers for the most part compare themselves to fuel oil and propane or electricity and kerosene, not what’s happening regionally.”

Right now, natural gas is one of the cheapest options Vermonters have for heating fuel (that is, if they have access to it), according to data from Vermont’s Department of Public Service.

And now for our second question ...

...Which came to us from Allison Litten, of Wilder. Allison, who has always been a fan of the supernatural, came to us with a question about a particular kind of Vermont story:

"What are Vermont's most interesting, intriguing, bizarre, mysterious ghost stories?" - Allison Litten, Wilder

"One of my favorite shows when I was little was Unsolved Mysteries,​" Litten says. "And so I guess that interest in beyond the human world has been with me forever."

To help answer this question we summoned Thea Lewis, one of Vermont’s resident experts on ghost stories. Lewis is the creator of Queen City Ghost Walk, in Burlington, and the author of several books on local haunts.

"Go out into the outer reaches of Vermont, and you just find all of these great tentacles of haunted lore," Lewis says. "

"Just the Revolutionary War History history alone brings us ghosts like Mad Anthony Wayne, who haunts the fort at Ticonderoga — but also, apparently, Lake Memphremagog, up in the Northeast Kingdom," Lewis says.

There's also the ghost of Ethan Allen, who claimed that his spirit would return as a "magnificent white steed," Lewis says, "and indeed, folks have seen this wonderful white horse galloping along the Intervale lands, where he used to make his home."

We barely had time to scratch the surface of the canon of Vermont ghost stories in this episode, so we're asking you to help us put together a Halloween special.

For now, enjoy this one local classic from Thea Lewis — which we're not going to reprint here, because it's truly meant for listening. Turn off your lights and settle in!

Support for Brave Little State comes from the VPR Journalism Fund and Darn Tough Vermont. Our theme music is by Ty Gibbons.

Other music in this episode was licensed through Creative Commons: