VELCO Warns Of Higher Costs, Says Some Power Line Projects Can Be Avoided

Aug 2, 2013

The operator of Vermont’s electric grid warns that customers will face higher and higher transmission costs unless some regional power line projects are scaled back or canceled.

The Vermont Electric Power Company (VELCO) says some costly projects could be avoided in New England as the growth of distributed, solar energy systems eases the strain on the grid.

Green Mountain Power’s recent request to raise rates by 2.4 percent highlights the role that transmission plays in our electric bills. GMP said the increase is needed to cover the utility’s share of the rising cost in Vermont and New England of new transmission projects.

GMP’s share of those costs for 2014 is $24 million higher than in the current rate year.

VELCO predicts more increases are coming and that the region needs to take a hard look at what projects are truly needed. VELCO Vice President Kerrick Johnson said Vermont must pay about 4 percent of transmission upgrades needed for grid reliability.

“We’re talking about another $5 billion of transmission that’s on the drawing board now. If we’re not successful in knocking off some of those costs, I wouldn’t call it a rate shock, but I think the kind of rate increases, the slow and steady rate increases for transmission, is just unsustainable,” he said.

Johnson said VELCO has avoided about $250 million in new transmission projects in Vermont because of the boom in energy efficiency and distributed generation projects, primarily solar. The solar systems in particular have helped shave Vermont’s summer peak electricity demand.

Johnson said VELCO has met with other transmission owners and the operator of the New England grid to make the case for better accounting of these distributed generation projects and their beneficial impact on the grid.

“There’s still going to need to be transmission built for a variety of reasons,” he said. “But the scale that’s being projected by the other transmission owners, our concern is that some of these long-term transmission projects may be being proposed to address reliability challenges that may not be there.”

The Shumlin Administration has also asked grid operator ISO New England to focus on the role distributed generation has on the grid. Deputy Public Service Commissioner Darren Springer said ISO didn’t use to consider the impact of efficiency programs when it made its forecasts. He said the organization now needs to assess the role of solar and other renewable projects.

“Everything that we do to become more energy efficient, to shave peak load, using solar and other distributed resources, can help us manage our own share of those costs,” he said. “But regionally we want to work with ISO to ensure that those costs are being bent downward to make sure that we’re not seeing continued increases in transmission costs around the region which ends up hitting ratepayers in every state.”

Johnson said VELCO’s message to re-evaluate the need for projects has not been fully embraced by other transmission companies. He points out that they make a fixed rate of return from transmission investments.

“When we suggested that we need to do a better job and capture this data and not simply stay on the same course based on what could be and may very well be obsolete data, I guess I would say, understandably at first, their reaction was… fairly hostile,” he said.

An ISO New England spokeswoman said the organization has convened a working group of experts and stakeholders to study the issue. The group will meet in September.