'On Time And On Budget'? Vermont Gas Execs Unsure Of Pipeline Budget, Completion Date

Jun 1, 2016

Vermont Gas systems is working on another season of construction of its Addison County natural gas pipeline, which company officials have long  said will be finished this year. Now, two legal challenges have caused company executives to lose confidence that the project will be completed by the end of this year and within its $154 million budget.

Since last August, it’s been clear what message the company has been trying to send in interviews. In 12 interviews with VPR, Vermont Gas CEO Don Rendall and spokeswoman Beth Parent used the phrase "on time and on budget" at least 26 times.

But then this week, something changed.

In an interview with VPR Tuesday, Rendall wasn't saying “on time and on budget” at all. The phrase was so noticeably absent that we asked if there was a reason for the change.

“We’ve got a very strong team working on this project – a very strong team in the field, a very strong team in managing the project here at Vermont Gas. And as we have also been very clear in saying whenever asked: The project is complex,” Rendall said. “It’s a big project to complete, and we are very focused on doing it in an efficient way. We had a commitment that was based on our getting access to right of way this summer, and this is a complicating factor.”

Rendall pointed out that the company has taken steps to protect its customers from the risk of additional cost overruns. The project was originally budgeted at $86.6 million, but multiple cost increases brought it to the current budget of $154 million.

“We’re focused on how to mitigate all of the complicating factors that we have in a project of this magnitude,” Rendall said. “And we were very committed when we did our negotiations with the Department of Public Service last year to finding a path that would protect our customers from all of the risks around a project of this scale, and we did that with our Memorandum of Understanding and our $134 million cost cap.”

The “cost cap” Rendall is referring to is an agreement between Vermont Gas and the state’s Department of Public Service, which represents the general public of Vermont in utility matters. The deal says Vermont Gas will not ask for its customers to pay for the entire $154 million cost of the pipeline. Under the deal, the company is limited to recovering $134 million from customers. Any cost recovery from customers must first be approved by the Public Service Board.

In his answer to the question about why he wasn’t saying “on time and on budget,” Rendall also hinted that the company may seek to recover more than the $134 million limit from ratepayers.

The company’s agreement with the Department of Public Service had specific exemptions for costs incurred because of delays in obtaining right-of-way for the pipeline or delays caused by interference at worksites.

“We’re of course going to live with that cost cap. We’re committed to minimizing the costs that are excluded from that cap, such as delayed access to right of way. We’re working every day to find ways to do this as efficiently, as cost-effectively and as swiftly as we can taking into consideration that we have a process to complete at the Public Service Board over [Geprags Park in] Hinesburg and we look forward to continuing and concluding that process in an orderly way.”

And now, instead of talking about completing it on time and on budget, Vermont Gas is just talking about finishing the pipeline.

“This is a complicating event,” Rendall said of the Hinesburg legal challenge. “We have this and another right-of-way parcel that still remains unresolved, and they are complicating events. We are working as best we can and efficiently as we can to get these resolved and to work around them. There’s no doubt that they will have impact on schedule and cost.”

Vermont Gas said last year that if the company didn't have land rights for the whole pipeline route by June 1, it could threaten the project overall.

With two properties still going through the eminent domain process, that deadline has passed. Now it's not clear when the project will finish, or how much it will cost.