Politically Thinking: Much is riding on CVPS acquisition

The bidding war between two Canadian utilities for control of Central Vermont Public Service has both economic and political implications for Vermont.
At the end of May, Fortis Inc., a utility holding company based in St. John’s, Newfoundland, made an offer to purchase all of CVPS’ stock. Fortis already owns electric companies in five Canadian provinces. The CVPS purchase would represent Fortis’ first entry into the American regulated utility industry. Fortis said that it would operate CVPS in the same way as its Canadian companies. Although owned by Fortis, CVPS would continue to operate as an independent firm, and its current management would remain in place.
A few weeks later, Gaz Métro, the Montreal-based owner of Green Mountain Power, made an offer to purchase CVPS and combine it with GMP. Gaz Métro is offering 15 cents a share more for the CVPS stock than Fortis. Gaz Métro and GMP said their proposal would end up saving Vermont ratepayers $144 million over 10 years. The cost savings would result from the combination of CVPS’ and GMP’s back-office, management and other functions. Gaz Métro would also place 30 percent of VELCO, the company that owns Vermont’s high-voltage transmission lines, in a public trust, with the income from the trust being used for rate-reduction programs for low-income Vermonters.
As of July 4, Fortis had not made a formal response to the Gaz Métro proposal, but the Newfoundland company may well come back with a revised offer. Once the CVPS board of directors decides to accept one of the offers, the Vermont Public Service Board must review and approve the proposed acquisition.
Whichever buyer ends up being successful, CVPS customers could benefit from the sale of the company. Both Fortis and Gaz Métro are considerably larger than CVPS, and would find it easier to raise capital to improve the system than CVPS could on its own. Having CVPS owned by a Canadian firm could also improve access to power from Hydro-Quebec and other Canadian sources, an important consideration if Vermont Yankee does indeed shut down next year.
Soon after Gaz Métro made its announcement, Gov. Shumlin said that, in his opinion, the GMP-CVPS combination had more benefits for the state than the Fortis purchase. He had in mind the savings for ratepayers and the placement of some of VELCO’s ownership in a public trust. While these are strong arguments in favor of the Gaz Métro proposal, one must ask whether Shumlin can be considered a truly neutral party in this matter.
Mary Powell, the CEO of GMP and the likely CEO of a combined GMP-CVPS, served as the chair of Shumlin’s inaugural committee. In this role, she was responsible for raising money, largely from corporate donors, to pay for the costs of the governor’s inauguration last January. Also, the Burlington Free Press reported that Powell was one of those attending the $5,000-per-person fund-raising dinner with Michelle Obama that was held in Burlington last week.
Powell obviously has the First Amendment right to contribute her personal funds to whatever candidates she wants to support. She is highly regarded as a business executive, and GMP’s performance under her leadership has been strong. Combining CVPS and GMP may well make both substantive and financial sense. However, the Shumlin administration needs to do a better job than it has thus far to convince Vermonters that its support for the GMP-CVPS combination is based on the merits of the proposal and not the interests of a major Democratic donor.
Eric L. Davis is professor emeritus of political science at Middlebury College.

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