PSB declines to alter Phase I pipeline approval, details future rate hike

MONTPELIER — The Public Service Board on Friday decided not to reopen the Certificate of Public Good it issued Phase I of the Addison Rutland Natural Gas Project, allowing construction of the pipeline from Colchester to Middlebury and Vergennes to continue.
The state utilities regulator also detailed an increased burden on Vermont Gas Systems ratepayers, who will ultimately pay for the pipeline project.
The Public Service Board took a second look at its approval of the project after Vermont Gas in July announced a 40 percent cost increase for the first phase of the pipeline, for a total expected price tag of $121.6 million. Ultimately, the board determined that while the cost hike was significant, it did not constitute fraud, misrepresentation or misconduct on behalf of Vermont Gas, and thus did not justify further investigation.
“We have concluded that the new cost information is not of such a material and controlling nature so as to change our previous determination,” the board wrote Oct. 10, holding that the project is still in the public good.
The Phase I pipeline project originally got the Certificate of Public Good from the PSB last December, but that was appealed to the Vermont Supreme Court. Now that the Public Service Board has said it won’t reopen its consideration of the certificate, the case is back in the hands of the Supreme Court, which will ultimately decide the fate of the appeal to the original certificate.
The Conservation Law Foundation, joined by the AARP and landowners along the pipeline route, urged the board to reopen its investigation. Both Vermont Gas and the Department of Public Service, which represents both utilities and citizens, asked the board to let the project continue unimpeded.
The department agreed with Vermont Gas’ assertion that despite the cost increase, building the pipeline is in the best interests of Vermonters.
“The evidence adduced in this proceeding showed a relatively small reduction of the significant benefits associated with this project,” the department wrote to the Public Service Board.
The board agreed with Vermont Gas and the Department of Public Service. The parties who urged the board to reopen the case were unhappy with the decision.
“AARP Vermont is extremely disappointed in the Public Service Board’s decision to allow the Vermont Gas Systems (VGS) pipeline project to continue without further scrutiny,” AARP spokesman David Reville said in a statement.
In particular, AARP chastised the Department of Public Service for siding with Vermont Gas.
“The DPS has done a terrific job of actually defending the utility and their pipeline plan instead of representing the ratepayers it is supposed to look out for,” Reville said.
Jane Palmer, a Monkton landowner and party to the case, said the regulatory process unfairly benefits utilities over citizens.
“The whole process is broken and rigged to get Vermont Gas the result it wants,” Palmer said in a statement. “The Board is giving Vermont Gas carte blanche to do and spend whatever they want, while ignoring the concerns of the larger community.”
In making its determination, the board cited the precedent it set in the Northwest Reliability Project, an electric line from Rutland to New Haven and on to South Burlington approved in the last decade.
In that case, the board chose to investigate the case after the Vermont Electric Company announced a 90 percent cost increase for the project, but ultimately decided not to reopen its Certificate of Public Good.
In a separate docket, the board has yet to decide whether Vermont Gas violated board rule 5.409, which requires utilities to notify the Department of Public Service in the event of a cost increase. Vermont Gas did not send a new project budget to regulators for more than a year before their July 2 announcement that Phase I would cost $35 million more than expected.
Vermont Gas apologized for not keeping regulators up to speed and agreed to pay a $35,000 fine, an amount recommended by the department. According the board’s order, Vermont Gas blamed the lack of communication on Clough Harbor & Associates, the engineering consulting firm it hired to estimate project costs. Vermont Gas has since fired CHA and hired a new firm to manage the project.
In its ruling Friday, the board made note of how the increased costs will be passed onto Vermont Gas ratepayers, who will finance the entire project. Originally, Vermont Gas projected customer rates to increase 4.5 percent. The South Burlington company has revised its projections to double that amount, concluding that rates will now increase by 10.2 percent.
The company estimates that project will not pay for itself for 31 to 32 years. The board in its December Certificate of Public Good estimated the project would recoup its costs in 20 years.
The board noted that additional cost increases could occur. Vermont Gas has agreed to update regulators about the cost of the project on a quarterly basis.
In light of the cost increase, Vermont Gas estimates the pipeline will save Addison County homes and businesses $195 million in energy costs over the next two decades, down from an original estimate of $200 million in savings.
Vermont Gas began construction on Phase I of the pipeline in June. Company spokesman Steve Wark told the Independent last month that Vermont Gas hopes to complete this portion of the project, which will run from Colchester to Middlebury, late next year.

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