In testimony before the full Senate, Department of Public Service Commissioner Elizabeth Miller Thursday experienced the power of political demagoguery and learned how the appeal of writing checks to a few trumps policy that benefits the many. She must have walked away dispirited.
It’s unusual this late in the session for anyone to testify before all 30 state senators. But the case in point, the proposed merger between Central Vermont Public Service and Green Mountain Power has been unusual from the outset. It’s a $750 million deal that concentrates the power of the state’s utilities into a single entity – Gaz Metro, of Quebec.
But what has drawn the ire of legislators (fueled by the AARP’s fundraising needs) is $21 million that is to be returned to CVPS customers when and if the company is sold.
Advocates want the Public Service Department to make the merger contingent on checks being written to CVPS customers – on average about $75 each (the wealthier would get more, the poorer less). Advocates insist that a deal is a deal. They note the PSB made it clear the only way they would agree to a rate increase for CVPS (more than a decade ago) was if the company agreed to pay its customers the $21 million in question.
As long as we’re stepping back in history, let’s take a full view.
It’s true CVPS was in tough shape. But the reason was that the regulators had disallowed the utility to pass through its costs of doing business. The issue driving the debate was the 30-year power deal struck with Hydro Quebec by Republican Gov. Richard Snelling in the mid 1980s. The market price for energy in the late 1990s was low, but the state was stuck with Hydro Quebec prices that were high. Legislators were screaming about the idiocy of the contract and trying to burn at the public stake those responsible.
Basically, the question was this: Why should the utilities be allowed to pass through the costs of a bad contract? To mollify the outcry, the board essentially granted the rate increase, but with the condition that the money be returned.
Of course, it ended up that the contract was a very good thing for the state. When market prices rose and the contract with Hydro Quebec was again advantageous, legislators who once complained, were heard no longer. They disappeared. It was political demagoguery at its worst. We’ve now negotiated another 26-year contract with Hydro Quebec, but the remnant of this decade-old regulatory morass is the $21 million owed CVPS ratepayers.
Nowhere in the agreement did the regulators specify how that $21 million was to be returned to the ratepayers. What is understood is that it has to be demonstrable and that the value meets the conditions of the agreement.
What Ms. Miller has proposed is that the utilities be forced into energy efficiency programs that would produce that value. In fact, it’s estimated that the required investments will yield a gross dollar gain to ratepayers of over $40 million, with a net value increase of $24 million. That’s $40 million over and above the projected $140 million ratepayers will see in reduced operational costs that will result from the merger.
Had she opted for the utility to write a $75 check to each ratepayer (or rather $100 to those with larger homes that use more electricity and much less for those with modest homes), it would have been a one-time affair, with no lasting benefit. By forcing the utilities to be more aggressive with their efficiency efforts, we all benefit, and the benefit is ongoing — year after year.
It’s incredibly ironic that many of the same legislators who want to take credit for stuffing a $75 check in the pocket of CVPS ratepayers are also the ones pushing renewable power and energy efficiency efforts at all other levels. It’s a lack of consistency explained by the political advantage of being able to take credit for disbursing cash to voters.
Ms. Miller explained her department’s responsibility to consider the state’s greater good; but it fell on deaf ears, which is disappointing. Her overriding responsibility is to forge public policy that is for the state’s overall good, and she sacrifices that responsibility if she abdicates to those pandering for votes.
We would hope she would stand her ground and that the utilities would do the same. To capitulate would expose the process to a level of political intervention that could undermine the public’s trust in future regulatory proceedings.
As distasteful as the process was, we expect the legislators will be saved from themselves. Fortunately, the governor has been resolute in his defense of Ms. Miller’s decision and legislators are smart enough to know they don’t have the votes to override a veto. They can puff out their chests without having to worry about the ill effects of intervening in a process in which they would do more harm than good.
Ms. Miller was just part of the show.
Welcome to Montpelier.