Regulators May Conduct Third Review Of Vermont Gas Pipeline Costs

Mar 29, 2016

Utility regulators may require Vermont Gas Systems to get a new permit for its natural gas pipeline to Addison County, according to an order issued last week.

The March 23 order from the Public Service Board says the quasi-judicial panel plans to consider a petition from the Conservation Law Foundation (CLF) that asks the board to require Vermont Gas to get a new Certificate of Public Good for the pipeline. The petition argues that because the project has increased in cost by nearly 80 percent since the board first issued a Certificate of Public Good in 2013, legal standards require a new permit

Sandra Levine, a senior attorney at CLF, said she thinks a new Certificate of Public Good (CPG) proceeding is required by the rules governing utility regulation.

“There are very clear Public Service Board rules that say if there’s a significant change to any project that a new or amended permit is required,” she said in an interview. “The nearly doubling of the cost of the project is a significant change that should prompt new review of the project.”

The board conducted separate reviews of two cost increases: One increase announced in July 2014, and another announced in Dec. 2014. Both reviews ended with board conclusions that the pipeline is still an overall benefit for Vermonters and should be allowed to proceed. (The board did fine Vermont Gas for failing to report the July cost increase in a timely manner).

Vermont Gas, in a motion to dismiss the CLF petition, argued that because the board has decided since the cost increases that the project could proceed, the CLF petition regarding the increases is effectively moot. The company’s filing said “there are no unresolved issues to be examined” under the board rules. The Department of Public Service also opposed the petition, according to the board’s order.

But the PSB disagreed with the state and the gas company, saying that previous reviews of the projects costs were done with a higher standard. Those reviews required the board to make a change only if the cost overruns were “of such a material and controlling nature so as to probably change the board’s decision in December of 2013 to approve the project,” the board said in the March 23 order.

The CLF petition makes a slightly different request of the board, asking it “to resolve whether a cost estimate increase for an approved … project constitutes a ‘substantial change’ to the project” under board rules, “thus necessitating an amendment to an existing CPG.”

In other words, this case asks the board to decide that the 2014 cost increases - which brought estimates for the pipeline from $86.6 million to $154.4 million - are big enough that they require a change to the CPG, but not necessarily big enough that the board would likely have denied a permit in the first place.

The CLF request doesn’t ask the board members to consider whether the cost increases would have changed their decision. It instead asks the panel to rule that the increases were “substantial” -- a lower threshold  than the previous reviews.

Still, Vermont Gas spokeswoman Beth Parent said the company is continuing with plans to finish construction on the pipeline this year.

"We're confident that this will not impact our construction schedule." - Beth Parent, Vermont Gas

“We’re confident that this will not impact our construction schedule,” she said.

According to claims by Vermont Gas executives in early drafts of an agreement with the Department of Public Service, the uncertainty created by an earlier Public Service Board review was nearly enough to cause the company to have to cancel the pipeline all together.

Parent reiterated the company’s claim that the cost increases have already been sufficiently addressed by the board, which has twice investigated cost increases and upheld the pipeline’s Certificate of Public Good in each case.

“The Public Service Board has asked for additional input,” Parent said, “and we look forward to presenting it to them and having this issue resolved soon. We’re confident that the question presented in this proceeding has been thoroughly reviewed by the Public Service Board in the January order [upholding the pipeline’s Certificate of Public Good.] Right now we’re preparing for a busy and productive construction season.”

The Public Service Board is taking comments from the parties to the pipeline case on how to proceed. Those filings are due by April 18, with responses due May 2.