Vermont Gas, State Officials Agree To Limit Pipeline's Ratepayer Impact

Oct 7, 2015

Vermont Gas Systems and the state’s Department of Public Service announced an agreement today that puts a limit on how much of the cost of its Addison County pipeline Vermont Gas is allowed to pass to ratepayers.

Under the agreement, Vermont Gas is allowed to recover $134 million of the project’s estimated $154 million cost from ratepayers.

According to the agreement, the cap on the amount the company can recover from ratepayers will “advance the parties’ mutual interest in completion of the Addison Project at a lower cost than forecast,” and provide an incentive for Vermont Gas to stay “on time and on budget.”

In other words, if Vermont Gas can find a way to complete the project – estimated at $154 million – for $134 million instead, the company can recover that entire cost from ratepayers and won’t have to take a financial blow for the additional $20 million.

“I think it was important for people to understand that ratepayers were going to be protected through this process,” said Department of Public Service Commissioner Chris Recchia. “And we all acknowledge the troubles that the project has had and the cost increase in terms of estimates, but I wanted to make sure that people understood that the ratepayers were not going to be on the hook for that entire amount.”

Critics of the pipeline said the deal is bad for Vermonters, and some say it’s further evidence that the Department of Public Service isn’t representing ratepayers as it’s supposed to.

In an emailed statement, Conservation Law Foundation Senior Attorney Sandra Levine said the agreement changes little.

“The pipeline project continues to be a bad bet for Vermonters,” she wrote. “It is too expensive and too polluting. Al Gore spoke yesterday at UVM about the horrors of our continued reliance on fossil fuels. It is troubling that a day later, Vermont signs a pact that saddles us for decades to the high cost and pollution from continued reliance on fossil fuels.”

The Vermont chapter of the AARP has consistently opposed the project on the grounds that it will drive up the cost of natural gas for ratepayers.

“We feel very strongly about this for our ratepayers, particularly in Franklin and Chittenden County right now – many of them senior citizens, many of them living on fixed incomes – who are essentially going to pay for a project that they’re never going to benefit from,” said Greg Marchildon, AARP’s Vermont state director.

Marchildon said after the deal was announced Wednesday that it reinforces his view that the Department of Public Service isn’t protecting ratepayers as well as it should be.

"I think it's clear that the department again has sort of failed miserably." - Greg Marchildon, AARP Vermont State Director

“I think it’s clear that the department again has sort of failed miserably. The notion that they could with a clear face say that this $21 million in what they’re terming as ‘savings’ is some way going to benefit ratepayers is the kind of stuff that fiction is made of.”

Recchia says the deal addresses precisely the concern AARP has been raising for more than a year – that the growing price tag of the pipeline would lead to rate increases for Vermonters.

“What we’re doing today is putting a point on that – that there is no way that we are going to support full recovery of this project based on how it has occurred to date,” he said. “And we’re notifying the board of that.”

Marchildon said he thinks it would be more appropriate for Vermont Gas to recover costs from ratepayers only up to the amount that was initially approved by regulators: $86.6 million. All additional costs were added by the company after the Public Service Board – Vermont’s utility regulator – approved the project. The board is now considering whether or not it should revoke or amend its approval and require more regulatory proceedings for the project.

And Marchildon said some language in the deal makes it clear to him that it was designed to influence a regulatory decision without being a formal part of the regulatory process.

The agreement says that the Department of Public Service and Vermont Gas “agree not to request [Public Service] Board approval, and that approval shall not be necessary for the effectiveness of the MOU [Memorandum of Understanding].”

Marchildon said this line exposes the agreement’s true purpose.

"There is no way that we are going to support full recovery of this project based on how it has occurred to date. And we're notifying the board of that." - Chris Recchia, Department of Public Service

  “It’s crazy, right?” he said. “I mean the job of the board is to make these determinations, so now that we know that they are not seeking Public Service Board approval, it’s clear that the only reason to file this for any reason at all is to affect the pending ruling that the board is considering right now on whether they should look at revoking the Certificate of Public Good for Vermont Gas.”

The board levied a $100,000 fine against Vermont Gas in July over its handling of last year’s cost increases.

Marchildon said AARP’s work on the case shows that the Department of Public Service isn’t doing its job representing Vermonters’ interests before the board.

“One of the things that we feel very strongly about is that AARP in many respects has been playing the role of an ad hoc regulator on behalf of its 140,000 members and the public across the state,” he said. “We’ve spent a lot of money and a lot of effort and a lot of time trying to protect ratepayers because we don’t think the Department of Public Service is getting the job done at all.”

Recchia said Marchildon’s characterization of the agreement is inaccurate.

“It’s disingenuous of AARP to say that this is outside of the board process,” he said, noting that the board has the authority to introduce the agreement into its process and request comments from other parties involved in the pipeline proceeding.

The agreement preserves all of the Department of Public Service’s rights to intervene in future rate cases before the board, a provision that Recchia says ensures the department will continue to protect Vermonters’ interests.

Correction Oct. 13, 2015 A previous version of this story misstated the amount Vermont Gas was fined by the Public Service Board. The error has been corrected.