Cost Overruns A Lingering Issue For Vermont Gas Pipeline

Aug 1, 2014

When Vermont Gas announced on July 3 that its pipeline from Colchester to Middlebury was going to cost 40 percent more than expected, opponents weren’t happy.

The harshest critics called it a “bait and switch” and asked regulators to revoke the company’s Certificate of Public Good approving the project.

Vermont Gas spokesman Steve Wark now says company officials knew as early as March that the project costs were on the rise, and he says the company probably should have told regulators sooner.

“We wanted to really have the final number [before we told the Public Service Board],” he said, “and in retrospect, it would have been better for us right out of the gate to have shared that with the department, with the board and the other parties.”

"We feel like they should be held accountable for failing to do the best job they could, and the fine makes that point." - Chris Recchia, Department of Public Service

The Department of Public Service (DPS) represents ratepayers for the state, and recommended a $35,000 fine for the $35 million increase, but said the project should go on as approved.

“We know that the benefits still surpass the costs by a hefty margin and so the project should continue to go forward,” said DPS commissioner Chris Recchia. “Nonetheless we feel like they should be held accountable for failing to do the best job they could, and the fine makes that point.

The Public Service Board is still in the process of deciding what to do about the Phase 1 increase, and now Vermont Gas is telling them that it’s not the only overrun.

Just under a month after announcing a $35 million increase on Phase 1 of the project, the company is filing with regulators to update Phase 2 with an increased cost.

Phase 2 is the step that would bring gas under Lake Champlain to an International Paper facility in New York, and Wark said Friday that it’s going to cost $10 million more than Vermont Gas thought it would.

“So it’s a total increase of 15.4 percent,” he said. “So it went from a filing cost of $64 million to $74 million, which is an increase of 15 percent, and 96 percent of that increase is paid for by International Paper.”

The good news for average ratepayers, Wark said, is that very little of that cost falls on them – bigger pipes and a few structures on the Vermont side of the lake are the only things that won’t be covered by International Paper.

The other good news, DPS Commissioner Recchia says, is that the relatively early announcement of the Phase 2 increase shows that Vermont Gas learned from the Phase 1 overruns.

“I think that Vermont Gas has learned from this experience in effect that their notifying the board about phase 2 increases is timely and a good thing for them to be doing,” he said.

For now, the company and its critics await decisions from the Public Service Board – both about any regulatory consequences of the Phase 1 overruns and about the fate of Phase 2.