Regulators could impose conservation on GMP

Vermont Business Magazine, Aug 01, 2005 by Kelly, Kevin

Green Mountain Power Corp, the state's second-largest utility, is redesigning its rate structure for the first time in 11 years - a move likely to result in savings for some types of customers and increased charges for others.

A draft ruling issued in June by a Public Service Board hearing officer urges the state regulatory body to "largely accept" the multifaceted proposal first presented by GMP a year earlier. But the officer did reject a few key parts of the design. In these instances, the draft ruling coincides with positions taken by an environmental advocacy group and conflicts with the views of the Douglas administration.

Critics of these findings will have the opportunity to make oral arguments before the Public Service Board this month (August). A final ruling on the GMP design could come before the end of the year.

In accordance with one tentative finding, GMP's residential customers would see their basic monthly billing fall from $11.27 to $ $8.76, with an increase likely to follow in the actual rates charged for electricity. As a result of a second pending revision in the GMP design proposal,

IBM would no longer be given special discounts intended to promote job creation. Vermont's largest private employer would have to pay an "energy efficiency charge" that, according to IBM spokesman Jeff Couture, would add about $150,000 to the $900,000 yearly payments that Big Blue currently makes for energy efficiency purposes.

The drop in the basic monthly charge for residential customers was supported by the Conservation Law Foundation as an indirect encouragement of conservation. The move will result in bills that more closely reflect actual power use, says CLF attorney Sandra Levine. She describes this outcome as also "good for the environment" because enhanced efficiency means GMP will need smaller quantities of power produced by fossil fuel-burning plants.

But Public Service Commissioner David O'Brien finds this aspect of the board's draft ruling "disappointing." O'Brien says he wanted GMP's basic monthly residential charge left intact.

"I don't think manipulating rates to make people not use a utility is a good form of conservation. I think it's just manipulation," the commissioner declares.

O'Brien suggests that the full board may not endorse the draft ruling issued by hearing officer George Young. The Public Service Board occasionally treats such findings as independent verdicts that it is not bound to accept, O'Brien notes.

He further disagrees with the tentative decision regarding the charges to be paid by IBM. Company spokesman Couture is also critical of the ruling that would push IBM's yearly energy efficiency payments beyond the $1 million mark, although he notes that IBM can qualify for a rebate of up to 70 percent of those outlays "upon completion of certain energy-saving activities."

The new GMP rate design is important to IBM because the company pays about $35 million a year for electricity at its Vermont locations, according to Couture. That sum is roughly $10 million above than the average national rate, he says. Particularly discouraging, Couture adds, is that the trend in Vermont is toward even higher costs.

While IBM, specifically, would have to pay a bit more under the Public Service Board's draft ruling, the rate design is intended to be revenue-neutral for all categories of GMP customers. The purpose of a redesign is not to adjust actual rates but to ensure a fair division of costs among different classes of customers. The redesign is also intended to set charges that are stable over time and that send efficient price signals.

Under the new structure, some groups will experience small increases in charges, says GMP spokeswoman Dorothy Schnure, while others will enjoy small reductions.

One big exception to this pattern is the anticipated 16 percent decrease in GMP's street-lighting bills for cities and towns in its service area Schnure notes. "When we moved to a deregulated wholesale market," she explains, "the difference between peak and off-peak power costs increased substantially." The savings for street lighting reflects off-peak hours of usage.

Green Mountain Power, headquartered in Colchester, serves 75,000 households and more than 13,000 commercial customers in central and western Vermont.

CVPS Under More Pressure

The state's largest utility, Central Vermont Public Service, is meanwhile preparing its own rate design proposal. But the Rutlandbased utility is simultaneously grappling with more pressing concerns stemming from a recent drop in its credit ratings.

Standard Poor's acted first, announcing in mid-June that it was lowering CVPS' bond rating to "below investment grade." Fitch Ratings then reduced the utility's senior secured debt rating by one notch, although that still left it above investment grade. The two moves will make it more expensive for CVPS to raise capital. And the company also indicates that it may reduce or suspend dividend payments to common shareholders.

Standard Poor's said its downgrade came in response to a Public Service Board finding in April that Central Vermont had been overcharging its customers. The board ordered CVPS to pay $6 million in refunds and to reduce its rates by 2.75 percent.