Some Vermont legislators are calling for a study on the costs, benefits and risks associated with the state’s acquisition of up to a 51% ownership interest in the Vermont Electric Power Company (VELCO), causing concern among stakeholders.
Specifically, S.172, sponsored by state Sens. Vincent Illuzzi, Peter Galbraith and Tim Ashe, as amended, calls for a financial advisor to study the costs, benefits and risks associated with Vermont’s acquisition of up to a 51% ownership interest in the state’s high-voltage bulk electric transmission assets, which are owned and financed by Vermont Transco and managed by VELCO.
The financial advisor is to report his or her findings and recommendations to certain legislative committees by April 2.
The legislation was prompted by the proposed merger of Central Vermont Public Service (CVPS) and Green Mountain Power (GMP), whose parent company is Gaz Métro.
The bill also calls for a consultant, who may or may not be the same financial advisor, to study whether Vermont’s acquisition of transmission assets would position the state to influence such public benefits as providing low-income or underserved individuals or communities with beneficial products or services. Those findings and recommendations are also due by April 2.
The secretary of administration is to submit a recommendation by April 9 as to whether the acquisition of up to 51% of Vermont’s transmission assets would benefit the people of Vermont and to provide the reasons for his or her recommendation, according to the bill.
Costs incurred in preparing the reports may be reimbursed from the general fund to the joint fiscal office up to $250,000.
The ultimate owner of GMP and, if the merger is approved, the ultimate owner of VELCO/Transco is the province of Québec, which also owns Hydro-Québec, Galbraith told TransmissionHub Feb. 17.
“If the merger goes through and Green Mountain Power acquires VELCO/Transco, it means that the province of Québec will own both the power and the transmission system,” he said, adding, “We think it’s a bad idea for the people who own the power to also be the people who transmit it.”
He said VELCO is a “terrific investment,” adding, “It has a 14% guaranteed rate of return.”
While there are additional capital costs, he said, “all that means is that you get the 14% on the additional capital.”
However, some, like state Treasurer Beth Pearce, do not agree. According to a Feb. 16 article posted on VTDIGGER.org, Pearce said that if the state bought 51% of VELCO and Transco, it would cost $500m, doubling the state’s total current debt obligation of $500m and hurting the state’s AAA bond rating.
Pearce could not be immediately reached for comment Feb. 17.
In response, Galbraith said, “This is a very highly rated asset, so you can’t acquire a AAA-rated asset and then have that affect your AAA credit rating. … It’s a very, very safe investment.”
Anyhow, he said, the legislative proposal is in studying a potential acquisition. He also noted that the price the state would pay would be about $250m because half of VELCO is debt.
Among other things, he said the state would have the right to acquire up to 51% and it would not acquire it all at once, but over time.
“Vermont should give serious consideration in deciding whether it should have a seat at the table when new transmission lines are built into Vermont,” Illuzzi told TransmissionHub Feb. 17. “My fear is that they’re going to build new transmission lines to serve southern New England and New York, not to primarily serve Vermonters.”
The bill has been approved by the Senate Committee on Economic Development, and it is in the Senate Committee on Finance, the senators said. It will then go to the Senate Committee on Appropriations and then go up for a floor vote.
Kerrick Johnson, VELCO’s vice president of external affairs, told TransmissionHub Feb. 17, “With regards to the legislation itself, we don’t think it’s necessary to spend $250,000 of taxpayer dollars for additional research on an idea that has clearly been identified as too risky by the state treasurer.”
He continued, “As the treasurer correctly noted, in addition to the purchase price, there would be an additional $500m or so in additional capital calls for equity to invest in necessary transmission reliability projects over the next five years.”
Johnson also said, “Under Vermont’s transmission and distribution grid regulatory structure, the revenues, the profit from transmission investment flows dollar for dollar back to ratepayers, so any diversion of those revenues away from ratepayers for some other use, however worthy, means on a dollar for dollar basis, you will be taking that away from ratepayers for a different function.” He added that that is unique in New England.
As for the merger, he said surrebuttal testimony is due with state regulators in early March.
“In our proposal for CVPS to merge with GMP, the new GMP would serve 70% of Vermont customers,” Dorothy Schnure, manager of corporate communications with GMP, told TransmissionHub Feb. 17. “In order to ensure we do not have controlling interest in VELCO, we have proposed transferring 30% of VELCO stock to a non-profit that would fund $1m a year to assist low-income customers. GMP would then own less than 50% of VELCO.”
She said it is important to understand that VELCO is highly regulated by the federal government and the state and will continue to be highly regulated, no matter who owns it. “In regards to the concern that Gaz Métro would be able to build unwanted transmission lines, keep in mind that any proposed power line would have to be determined by the [state] Public Service Board to be in the public good, no matter who owns VELCO,” she said, adding that it is also worth mentioning that Gaz Métro is a natural gas company, it is not province of Quebec and it is not Hydro-Québec.
Schnure also claimed: “If VELCO would be sold to the state, there would probably be a 3-4% rate increase. In Vermont, benefits from VELCO flow through to customers by lowering the cost of service. If the state were to purchase VELCO, customers would no longer get that benefit and rates would increase.”