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Vermont Gas fined $100,000 for late report on its cost hike

SOUTH BURLINGTON — The state’s utility regulators fined Vermont Gas Systems $100,000 for failing to report in a timely manner a cost increase on the natural gas pipeline it is building from Colchester to Middlebury and Vergennes.
The Public Service Board on Friday wrote in an order that Vermont Gas broke the public trust in its regulatory authority when it waited “nearly six months” to disclose its first cost increase on the project last year.
The fine is nearly three times the amount requested by the Public Service Department, which advocates for the public in front of state regulators. Under state regulatory rules, companies must notify the Public Service Board when capital costs increase by 20 percent or $25,000.
When the board approved the Addison-Rutland Natural Gas Project pipeline in December 2013, the cost was approximately $86.6 million. Vermont Gas started building the project in June 2014 and announced an increase to $121.6 million in July 2014. That is a 41 percent, or $35 million, cost increase.
The fine is for the project’s original cost increase. The cost has since increased a second time to $153.6 million, prompting a second series of hearings in June that caused the public to once again question the credibility of the regulatory board. The Public Service Board has, in turn, questioned the credibility of Vermont Gas.
“Trust and transparency are essential for effective regulation,” the board wrote in its Friday decision. “By waiting nearly six months before disclosing to the board a cost increase in excess of 20 percent … (Vermont Gas) failed in its obligation of transparency, thereby undermining the effectiveness of the regulatory process and creating mistrust in that process among the public.
The Public Service Board rules say companies that do not report cost increases can be fined not more than $40,000 for failing to report, plus $10,000 per day “in the case of a continuing violation.” However, the total cannot exceed $100,000, under the regulatory rule.
The Public Service Department, which advocates for ratepayers in front of the regulatory board, had previously suggested a $35,000 fine as part of the case. Vermont Gas agreed to the $35,000 fine the department suggested, but called the Public Service Board rule vague in testimony.
Don Rendall officially took over as CEO in January, six months after the company came under fire for its first cost increase. Don Gilbert had been running the company when the first cost increase was announced.
“We understand and respect the board’s order with regard to events that occurred during the first half of last year,” Rendall said in a statement on Friday. “We will comply with the order. We appreciate the board’s acknowledgement of our overall compliance record.”
Rendall said the South Burlington company has a “demonstrated record of accomplishment” with regard to transparency since he began running the company. “We are making tremendous progress on the (project) with mainline construction beginning this week.”
The Public Service Board is expected to decide in the coming weeks whether to reopen the project’s state-level permit, called a certificate of public good.

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