Pipeline opponents ask PSB to investigate December pipeline cost hike

MONTPELIER — The three members of the Public Service Board may have had a bout of déjà vu Monday afternoon. That’s when, as expected, opponents of the Addison Rutland Natural Gas Project formally asked the board to investigate a second major cost hike announced by the company for Phase I of the pipeline.
Kristin Lyons and the AARP each filed motions with the board Jan. 12 that ask the tribunal to convene hearings to hold Vermont Gas officials accountable for what they allege is mismanagement of the project.
“The Board and the public no longer can accept the credibility of Vermont Gas’ witnesses or accept Vermont Gas’ justifications for going forward with the project,” wrote Bristol attorney James Dumont, who authored both briefs.
The opponents want the board to find out why Vermont Gas did not realize its cost estimates were wrong until December, how previous estimates could have been so inaccurate and if the economic benefits of the project still outweigh the cost.
On Dec. 19, the company announced a $32 million increase that brings the estimated price tag to $154 million — 78 percent more than when regulators approved the project in December 2013.
That announcement came on the heels of a similar one five months earlier, when Vermont Gas in July announced a $35 million increase.
In July, opponents quickly asked the board to launch an investigation, and the board agreed. After taking testimony from company officials in September, the board in a ruling Oct. 10 dismissed warnings from opponents that the figure shouldn’t be trusted and allowed the project unimpeded.
Dumont asked regulators to find out:
•  Why Vermont Gas’ Oct. 7 budget report was just two pages long, stuck to the July cost estimate and gave no indication that a future cost hike was possible or imminent.
•  How the company underestimated the cost of the project by $33 million.
•  Why the company did not begin using industry-standard accounting methods until October.
•  How much longer than 32 years of cross-subsidies, the Board’s estimate based on the $122 million July price tag, the new $154 million cost would require.
•  Why, between July 2 and Dec. 19, Vermont Gas did not adjust its cost estimate for Phase I, nor tell regulators it would need to do so.
Should the board reopen the case this time around, the investigation will be procedurally similar as in the fall. But the outcome could be anything but.
The Department of Public Service largely sided with Vermont Gas during the September cost hike investigation, but Commissioner Chris Recchia told the Independent last week that if regulators determine that project is no longer economically feasible, that “will be a turning point.” He vowed to take a harder line against the company this time around.
The Board will also have to wrestle with whether its trust in the July budget, as well as the September testimony by Vermont Gas executives, was misplaced, since that estimate turned out to be wrong.
Dumont argued that the board was wrong not to question the July cost estimate provided by the company, and urged regulators not to repeat their mistake.
“The integrity of these proceedings, and the public’s trust in the Board, now hang in the balance,” Dumont wrote.
Dumont concluded that based on the evidence, the Public Service Board should revoke its December 2013 approval of the project.
Vermont Gas spokeswoman Beth Parent said Tuesday that should the PSB open an investigation, the company is prepared to cooperate.
She said Vermont Gas will file documents detailing the December cost hike with the Board on Thursday.
The participation of the AARP — a nonpartisan, nonprofit organization — in a politically charged case might strike many Vermonters as odd. But Greg Marchildon, the group’s Vermont state director, said the AARP has entered the fray as an advocate for ratepayers, who he says have been failed by the Department of Public Service.
“Our confidence in the department is not extremely high,” Marchildon said. “They have not asked the kinds of questions and not done the due diligence that needs to be done.”
Marchildon pointed to “terrible management” of the project by Vermont Gas, noting that the company replaced the firm it hired to estimate costs after it deemed its work to be subpar.
Marchildon said regulators have so far failed to sufficiently investigate why Vermont Gas has been unable to keep costs from rising. He said that throughout the three-year history of the project, the department has failed to vet the company’s budget estimates for potential inaccuracies.
“We need the Public Service Department to do what it’s supposed to do,” he said. “It should be a primary voice of ratepayers, and that’s clearly not happening here.”

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