Editorial: A splinter bedevils the $750 million deal to merge utilities
Between and betwixt the complex merger of Green Mountain Power and Central Vermont Public Service, a splinter of an issue is bedeviling the legislative leadership, the Shumlin administration and the Department of Public Service. The issue is a provision in a recent memorandum of understanding allowing the utilities to recapture a $21 million pledge to repay ratepayers through future rate hikes.
It’s an understandable oversight that needs a remedy.
Understandable because in the grand scheme of things recapturing the $21 million is a relatively minor concession out of what is a complex $750 million deal; understandable because in a highly regulated industry the way expenses are recouped is by allowing the utilities to fold costs into regular rate increases approved by the Public Service Board; understandable because there is precedent for doing what the Department of Public Service negotiated with the utilities (they did the same thing with GMP in 2007 when Gaz Metro bought them.)
But as the public uproar has demonstrated, this is not just business — there’s the principle of making a company uphold its end of a deal. More than a decade ago when CVPS was having a tough time making ends meet because of what were then high rates through the Hydro-Quebec contract, the PSB effectively granted the company a $21 million rate increase with the provision that if the company were ever sold in a profitable deal that amount would be reimbursed to ratepayers.
In this recent negotiation, the PSD sought to make good on that pledge by crafting an agreement for the utilities to invest the $21 million in an energy efficiency fund to help the lower-income; those measures in turn would yield an estimated $40 million in value — a value that would be recurring year after year. As in most instances when the utilities provide monetary benefits to ratepayers, the PSD’s recommendation allows them to recoup their expenses in future rate hikes.
The measure was put into a memorandum of understanding between the PSD and Gaz Metro, the Canadian firm that owns GMP and which is set to take over CVPS. That memorandum is part of a much bigger deal that provides ratepayers with more than $140 million in savings as a result of efficiencies gained from the merger.
One alternative, as the AARP has lobbied, is to cut ratepayers a check for their small slice of that $21 million. The shortcoming, however, is significant because it gives most of the benefit to big businesses. A business like OMYA in Florence, for example, would receive more than $1 million of that $21 million. The average ratepayers will get enough (less than $75) to have a modest meal for two out on the town — once. In short, it’s a feel-good sound bite that delivers little benefit to ratepayers, while missing a real opportunity to help make hundreds of homes more energy efficient.
As we have written before, the progressive solution is not to give cash back, but rather to adopt the bulk of the PSD’s proposal — with one exception: revisiting the provision that allows the utilities to recapture the $21 million through future rate hikes. It is an oversight that many in the legislature and some in the administration now silently concede.
Even so, it is not easy to fix.
The PSB is a quasi-judicial entity that sets electric rates outside of political influence. It is necessary to keep it so, and it sets a worrisome precedent for the Legislature to get involved by a direct vote. To that end, an amendment that might be offered on the floor of the House early next week to return the $21 million to ratepayers through a cash payment should be avoided if possible, or defeated if it is brought to a vote.
In its place, a joint resolution of the House and Senate that encourages the Shumlin administration and the Public Service Department to rethink this small aspect of the agreement — based on a clause in the memorandum that allows the Legislature to question whether the agreement adequately serves the public good — might be enough to reopen the negotiations and come up with a solution that takes the sting out of this particular misstep as well as reinforces the enormous benefit of the merger to ratepayers.
Angelo S. Lynn
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