Should the state of Vermont get into the energy business? That’s suddenly become one of the most pressing questions in Montpelier.
International energy giant TransCanada is selling a series of large hydroelectric dams along the Connecticut and Deerfield rivers, and lawmakers are going to have to decide quickly whether the state should try to acquire them.
It isn’t the first time policymakers have wrestled with this question. The dams were last up for sale in 2003. Vermont offered $385 million for dams that, at the time, would have met nearly a quarter of the state’s total electricity demand.
Vermont was outbid by TransCanada, which paid $505 million for the assets. The company is now re-selling the dams to finance a merger, and top elected officials say it’s a compelling opportunity.
“If this is a once-in-a-generation opportunity, we have to do whatever we can, whatever the timeframe, to make sure this isn’t a lost opportunity,” says House Speaker Shap Smith.
Smith, Senate President John Campbell and Gov. Peter Shumlin announced the creation Tuesday of a seven-member working group to vet the merits of a purchase.
“Really we’re asking this working group to vet preliminarily whether full or partial acquisition of the hydro assets currently for sale is cost-effective, and to evaluate the benefits first and most importantly to Vermonters, to Vermont’s economy, our utility ratepayers and our clean energy portfolio,” Shumlin says.
The group won’t have much time to come up with answers. Secretary of Administration Justin Johnson has been named chairman of the Vermont Hydropower Working Group, and he says he aims to have recommendations to the Legislature on how to proceed in three weeks, so they can consider the best course of action before they adjourn, likely in early May.
TransCanada has indicated it wants to have the transaction complete before the end of this year, and Johnson says he wants lawmakers to decide before they leave Montpelier whether they’re willing to authorize an appropriation to purchase the dams.
TransCanada hasn’t named a price, and will likely seek bids from interested buyers.
“It’s a pretty big conversation that is likely going to have to happen in a time frame that not all of us are all that comfortable with, I suspect,” Johnson says.
Johnson says the state could potentially leverage ownership of low-cost, reliable, non-fossil-fuel energy in ways that might benefit ratepayers, and spark economic development.
“But they come with some risks as well,” Johnson says.
State Treasurer Beth Pearce enumerated some of them to lawmakers on Tuesday.
“Energy pricing has been a little volatile lately and what that would do in terms of impacting the income that would be used to pay down the bonds, if in fact that’s the way we went,” Pearce says.
Officials say there are any number of ways the state could structure the bond used to cover the upfront acquisition, and that a public-private partnership is among the possibilities.
Shumlin says he also wants to look into buying a portion of the dams, as opposed to the entirety of the portfolio, which also includes about 20,000 acres of land and some fossil fuel energy plants.
Even if energy prices end up favoring the state, Johnson says there are all kinds of other potential risks, be they mechanical failures, unanticipated operating costs, struggles with re-licensing or simply the pitfalls of running a business.
“If we do have long-term financial agreements with other payments to buy power and they don’t pay, then what happens?” Johnson says.
Pearce says she's excited about the possibility of an acquisition. But she says the working group needs to make sure that purchase of the dams won't pose undue risks to Vermont's bond rating.
Lawmakers will likely want answers to those questions and more before they’re willing to sign off on a deal.
The Hydropower Working Group also includes Treasurer Pearce; former Public Service Board Chairman Michael Dworkin; Linda McGinnis, the former lead economist at the World Bank; Tom Dunn, CEO and president of the Vermont Electric Power Company; Mayor of St. Albans Liz Gamache; and Essex County State’s Attorney and former state senator Vince Illuzzi.