State: Vermont Gas Mishandled Price Estimates From The Beginning

Mar 25, 2015

Vermont’s Public Service Board is considering a $35,000 fine for Vermont Gas Systems because of the company’s handling of major cost overruns that have raised the estimated cost of the Addison County pipeline by about 80 percent over the past year.

In question is whether Vermont Gas Systems behaved responsibly in developing a new cost estimate last summer. The company knew about the increase as early as last March, but didn’t tell regulators about it until July.

Public Service Commissioner Chris Recchia, whose department represents ratepayers, says the delay in notifying the Public Service Board isn’t his main issue with Vermont Gas.

Recchia says he thinks a penalty is in order “because, in my mind, they should have been tracking industry standards of production costs before the 2013 period … so that is why we recommended the penalty.”

He said the national changes in demand for pipeline construction should have been part of the company's initial estimates.

“Had they been following that closely or thinking about it more closely, they might have been putting two and two together," he said.

With regard to the delay in notifying regulators last spring, Recchia said: “I think they made the wrong decision. We were encouraging them to notify the board, but they wanted to wait” until they knew exactly what the new cost would be before notifying the board.

However long the company waited to tell regulators, Recchia said the bigger issue is that Vermont Gas itself should have known about the higher price sooner – perhaps even before regulators initially approved it in 2013.

Vermont Gas Systems acknowledged at a hearing Wednesday and in a news release that the cost increase was mishandled.

The release says that “Vermont Gas continued to acknowledge that the company could and should have provided the PSB information about increasing cost estimates for its Chittenden to Middlebury gas pipeline extension project earlier in 2014 than it did.  Since then the company has both improved its cost estimation process and capabilities while providing quicker notice to the PSB when cost increases are anticipated.”

The release did not address whether the company should have known before last spring that costs would rise.

The Public Service Board is in the process of deciding whether to reopen its permitting process for the pipeline in light of a second major increase announced in December.

Vermont Gas informed regulators about that overrun much more quickly.