Regulators, Vt. Gas gird for newest court battle

ADDISON COUNTY — Vermont Gas Systems, opponents of its Addison Rutland Natural Gas Project pipeline and state regulators have all filed briefs attempting to influence how the Public Service Board conducts an investigation into the project’s second multi-million-dollar cost hike.
The board asked the state Supreme Court on Jan. 16 for remand of the case, a process by which a higher court sends a case back down to a lower court. The Public Service Board is seeking jurisdiction of the case to investigate why, for the second time in six months, Vermont Gas increased the budget for Phase I of the pipeline by more than $30 million.
In December, the South Burlington company announced that it now forecasts the project to cost $154 million, about 78 percent more than when regulators approved it in 2013. That revelation came on the heels of a July 2014 cost increase of $35 million.
In a flurry of filings in the last several weeks, opponents of the project — a 41-mile pipeline from Colchester to Middlebury and Vergennes — who are parties to the case reiterated claims they have made for more than a year: That Vermont Gas can’t be trusted to calculate accurate budget numbers and the company is incapable of managing such a large project.
While the PSB has dismissed many of the charges in the past, opponents hope the board will consider them more carefully this time around.
Vermont Gas, which named a new CEO shortly before this second cost hike, says it welcomes any investigation of the project and insists it is still in the best interests of Vermonters to see it completed.
Critics of the project include citizens, landowners along the pipeline route, the Conservation Law Foundation, AARP, and the Vermont Fuel Dealers Association (VFDA).
Conservation Law Foundation attorney Sandra Levine argued that in light of the December cost hike, the Phase I project would need an amended Certificate of Public Good, or CPG, from the Public Service Board in order to proceed, because the hike was a substantial change to the project.
“Because the cost increase is again so significant, it has the potential for a significant impact with respect to one or more of the Section 248 criteria,” Levine wrote. “An amended CPG is required to authorize the project.”
Levine asked the PSB to halt construction on the pipeline until it issues a new approval for the project. No construction is planned to take place this winter, but Vermont Gas plans to get back to work once the ground thaws.
Bristol attorney James Dumont, filing on behalf of resident Kristin Lyons and the AARP, also argued that the PSB should reopen its approval of Phase I, which it granted in December 2013, in order to protect ratepayers. Dumont said the most recent cost hike would likely lead the board to a different conclusion than it reached in 2013 and also last fall, when it investigated the July cost hike but concluded the project should move forward.
Dumont criticized the PSB for  agreeing with testimony by Vermont Gas officials and witnesses while rejecting arguments by opponents. He said the board should not, as it did in October, trust that Vermont Gas’ budget calculations for Phase I are accurate.
“No reasonable person at this point would conclude that costs will not continue to rise,” Dumont said. “The Certificate of Public Good that was once justified by the record of the case should be withdrawn.”
Richard Saudek, representing the VFDA, urged the board to revisit its approval of the pipeline, and argued that the economic benefits Vermont Gas touted are no longer true.
“In short, claims that homeowners can cut their bills in half by converting from oil heat to utility gas are not credible, especially in today’s markets,” Saudek wrote. “Any purported economic benefit attributed to the project has vanished.”
The Department of Public Service, which is charged with representing both ratepayers and landowners along the pipeline route, said it had “serious concerns” about the December cost hike.
Department counsel Louise Porter argued that while the December hike was significant in its own right, when coupled with the July cost hike it merited intense scrutiny.
“With a cost estimate increase of this magnitude, the facts and assumptions underlying the CPG have potentially changed to such a degree that it is imperative that the Phase I Project be reconsidered,” Porter wrote. “The Department strongly urges the Board to investigate whether the Phase I project remains in the public good in light of the revised cost estimate.”
The department’s commissioner, Chris Recchia, told the Independent last month that his staff would vet the December cost hike more than it had the July increase. Last fall, the department concluded that while the July cost hike was undesirable, the PSB should allow it to proceed without imposing any sanctions.
Porter asked the board, should it receive remand of the case from the Supreme Court, to launch a broad investigation that not only looks at the cost increase, but “all relevant changes to the project to date.” During the July cost hike investigation last fall, the department sought an inquiry that only focused on the cost of the project.
In another departure from the board’s investigation of the July cost hike, Porter said DPS is more hesitant to trust the $154 million budget Vermont Gas announced in December. She said the department “will not prejudge the accuracy” of the new budget, but instead will ask the board to take steps to ensure its reliability.
The department’s shift in stance from its hands-off approach to the last investigation, Porter explained, was spurred by two things: the size of the cost hikes and the short period of time between them.
“Two significant upward cost revisions announced in a relatively short period (approximately six months) provide a sufficient (if not compelling) basis for subjecting Vermont Gas’s cost estimations to greater scrutiny,” Porter wrote.
Vermont Gas attorneys said the company does not oppose an investigation into the December cost hike, but urged the board to do so with a more narrow scope than suggested by the Department of Public Service and opponents. The company also opposes any halt on construction.
In defense of project cost increases, the company cited the 2005 Northwest Reliability Project case in front of the PSB. In that case, the Vermont Electric Power Co. increased its budget for the project by 90 percent, but the board did not amend or revoke its approval of the project.
The company maintains the project should be allowed to proceed and will still provide economic benefits to Vermonters.
If the Supreme Court grants remand of the case, as it did in September, the board will have the authority to launch a new investigation, which will likely include testimony from Vermont Gas officials as well as witnesses called by the company, DPS and other parties.
The court has yet to respond to the request for remand.

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