Agreement caps pipeline costs for Vermont Gas ratepayers

MIDDLEBURY — Vermont Gas on Wednesday morning announced a memorandum of understanding with the Vermont Department of Public Service placing a limit of $134 million on the amount it will seek from its ratepayers for expenses related to the Addison Natural Gas Project pipeline.
That amount is $20 million less than the $154 million the company had forecasted for the project back in December.
“This agreement between Vermont Gas and the DPS will help achieve an important, shared goal: Capping pipeline construction costs and providing energy value to natural gas customers in Vermont,” Vermont Gas President and CEO Don Rendall stated in a press release confirming the memorandum, also called an MOU. “The agreement is great news for our customers and Vermont’s economy, and it’s great news for Vermont’s energy future.”
But Rendall added the MOU includes a caveat.
 “Vermont Gas will not seek to recover costs above $134 million from customers — significantly less than the project’s estimated cost of $154 million announced last December –— except for certain costs beyond our control if they occur.”
The Addison Natural Gas Project calls for a 41-mile extension of the Vermont Gas transmission pipeline from Colchester to Middlebury and Vergennes. The extended pipeline is designed to bring natural gas service to portions of Monkton, Vergennes, New Haven, Bristol, East Middlebury and Middlebury.
It is a project that has drawn support from some of Addison County’s larger businesses, such as Middlebury’s Agri-Mark Cabot cheese plant, which expects to save millions by replacing the fuel oil it uses with cheaper natural gas. But the project has also drawn a lot of opposition from environmental groups and some county residents who have voiced concerns about the construction and safety impact on landowners along the project route, potential pipeline leaks or explosions, and the encouragement it gives for continued use of fossil fuels.
Rendall noted the project is currently under construction.
“The company has made excellent progress this year,” he said. “We are near completion of the segment through Colchester, Essex, and Williston, which will achieve our 2015 construction goal on time and on budget.
“This agreement will help provide this choice to Addison County households, businesses, schools and other public facilities — on time and on budget starting in late 2016,” Rendall added.
Vermont Public Service Commissioner Chris Recchia called the MOU an important step toward both completing the pipeline efficiently and protecting ratepayers. He noted that the $134 million cap on charges to Vermont Gas customers reflected the last cost estimate reviewed by the Public Service Board ($122 million) plus a 10 percent contingency.
“This is fully $20 million less than the current estimated cost of the project, and it brings the potential costs to ratepayers down to a level more comparable to the last proceeding in which the board continued to find the project was in the public good,” Recchia said in a press release. “The only exceptions to this cap are if there are delays to the project beyond the control of VGS.”
Recchia added the MOU does not preclude the department from reviewing, investigating and challenging costs associated with the project.
“This is a cap, not a floor,” he said. “If we find other costs were imprudently incurred, we will subtract those from the project costs. Other parties will also have the opportunity to participate, as is the standard practice in a rate case.”
Gov. Peter Shumlin issued the following statement on the Vermont Gas agreement:
“I’m pleased that the Public Service Department was able to work with Vermont Gas to lower the cost of the project to ratepayers by $20 million. This agreement can give ratepayers confidence in the cost of the project.
“I continue to believe that expanding natural gas beyond Chittenden and Franklin counties will be good for Vermont, bringing a cheaper fuel choice and new energy efficiency services to Vermonters whose incomes are not keeping up with the rising costs of health care and property taxes and replacing dirty oil with a cleaner fuel source. I’m pleased in the steps Vermont Gas has taken in the last months to show their commitment to completing this project for the benefit of Vermonters.”
Reporter John Flowers is at [email protected].

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