Vermont regulators on June 15 approved the merger of Central Vermont Public Service (CVPS) and Green Mountain Power (GMP), saying that it would benefit customers and be in the public good.
A formal closing is expected later this month, the companies added.
GMP is owned by Canadian firm Gaz Métro.
The combined utility will transfer 38% of its ownership in Vermont Electric Power Company (VELCO) to a public trust, ensuring that ownership and control of VELCO remains with Vermont entities.
The companies also said that the transfer of stock to the Vermont Low Income Trust for Electricity (VLITE) will generate an annual dividend of $1m that the state Public Service Board (PSB) has directed “will fund projects and initiatives that further the energy policies of the state of Vermont.”
The PSB’s approval incorporates the agreement that GMP reached with the state Department of Public Service (DPS) that increased the benefits to Vermonters from $144m to $177m by providing more benefits to customers sooner than originally proposed.
Dorothy Schnure, GMP’s manager of corporate communications, told TransmissionHub June 18 that the merger’s real impact on transmission relates to “how we need to change VELCO governance to assure that Green Mountain Power does not control the VELCO governance…that’s really where VELCO and transmission comes into play.”
A VELCO spokesperson could not be immediately reached for comment June 18.
Schnure said, “When we initially announced the merger, we knew that it just would not make sense for the new Green Mountain Power to control VELCO, so…we said that we would give a portion of the VELCO stock to this VLITE organization.”
Many utilities, smaller municipals and cooperatives sit on the VELCO board and have an interest in transmission, she noted. “We work cooperatively as a state,” Schnure said. “If you have a major storm, you get all the utilities on the line, working to help each other out, to make it happen, and it just would really not be in the spirit of Vermont for us to control the transmission system in its entirety, so we wanted to be sure that the other utilities and public members still had an important voice in the control of the transmission system.”
The PSB’s order
According to the order, the DPS memorandum of understanding provides that VLITE will participate as a shareholder in VELCO for all purposes and will be entitled to designate members of the VELCO board under a VELCO voting agreement. The VLITE board of directors may also establish criteria for voting of its VELCO shares, and will have the authority to invest its VELCO dividends in any way consistent with state policy on energy issues, as noted in the comprehensive energy plan or as otherwise subsequently designated.
The PSB also said GMP and Vermont Electric Cooperative (VEC) agreed to start negotiations in efforts to agree to a mutually acceptable model for the ownership and operation of the Irasburg-East Fairfax transmission facilities, which serve eight VEC substations and/or metering points, by July 15.
The PSB noted that VELCO forecasts between $400m and $500m of additional infrastructure investment in the next five years. “Gaz Métro’s ownership of the combined company would provide additional assurance to VELCO that needed funds will be available for these transmission upgrades given GMP’s solid record since it was acquired by Gaz Métro of not only funding its share of transmission upgrades as required, but also of stepping up to fill the breach when other distribution utilities could not, or would not, respond to equity calls,” the PSB said.
Since acquiring GMP in 2007, Gaz Métro has invested $46m in GMP, and separate from the CVPS acquisition, Gaz Métro has committed to invest $75m in GMP to allow it to pursue investments in renewable energy generation, smart grid implementation and transmission upgrades through the VELCO companies, the PSB said.
While there have been some concerns about Gaz Métro being interested in the merger in order to bring more Canadian power through Vermont to southern New England, the PSB said: “[W]e are persuaded that there is no factual foundation for this concern. In addition, our evidentiary record squarely documents that Gaz Métro will not be able to control VELCO using the majority shareholder powers of the combined company because [GMP and CVPS] have agreed to dilute their combined majority interest by transferring stock and voting rights to VLITE.”
Even if Gaz Métro were to partner with an electric generation company such as Hydro-Quebec in efforts to exploit VELCO to move electric power through Vermont, such an effort would be unlikely to succeed as the existing system capacity limitations and the regulatory policies in place at the federal level prevent transmission system owners from favoring their own system-access interests over those of other utilities, the PSB said.
Companies: Merger to bring improved reliability
A combined CVPS and GMP will improve reliability and service for Vermonters, the companies said, noting that a contiguous service territory and one operations headquarters will streamline storm response to restore power faster and reduce the overall frequency and duration of outages.
“This once-in-a-lifetime opportunity will save customers money and create additional significant benefits to customers of both utilities,” GMP President and CEO Mary Powell said in the statements. “Our guaranteed cost savings and reliability improvements will help our customers with their own household and business budgets, and be a boon to Vermont’s economy at a time when it is critically needed. We have set a goal to become the best small utility in the country, and with this regulatory approval, we can begin the work to make that goal a reality.”
CVPS President and CEO Larry Reilly said in the statements: “There is justifiable pride in our record of customer service, reliability and storm response at CVPS, but I am confident that our employees will work with their new co-workers at GMP to provide even greater service levels in the years ahead. And I am confident that GMP will continue and expand [our] commitment to the communities we have traditionally served, including Rutland.”
In a separate June 15 statement, Gov. Peter Shumlin said that the terms approved by the PSB will produce “extraordinary benefits” for Vermont and consumers.
“This merger will result in dramatic cost savings of $144m over the next decade and $500m over 20 years, improve efficiency and lower energy costs for more homes, and ensure that the public interest will be represented in the oversight of our state transmission system,” he said.