Brock urges Shumlin administration to reopen CVPS merger deal MOU

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Brock urges Shumlin administration to reopen CVPS merger deal MOU

Wed, 04/04/2012 - 5:26am -- tim

by Anne Galloway vtdigger.org State Senator Randy Brock (Franklin-Grand Isle), the Republican candidate for governor, wants the Shumlin administration to renegotiate a deal it made with Gaz Metro last week on the $21 million for windfall.

Brock says he wants the the Department of Public Service to reopen the memorandum of understanding with the Montreal-based company, which owns Green Mountain Power and is in the middle of seeking state approval for the purchase of CVPS, the stateâ s largest electric utility. If the Public Service Board approves the deal next month as expected, Gaz Metro will own power distribution networks for 78 percent of Vermontâ s ratepayers.
â The methods being proposed for this money donâ t necessarily inure to the benefit of all the individual ratepayers and indeed since some of them are means tested, many ratepayers will see nothing at all,’Brock said. â A relatively few will see significant benefit, but many who are aged will see nothing. We believe the ratepayers have the right to be reimbursed appropriately.â
As part of the deal with the state Gaz Metro is obliged to ensure that $21 million of the proceeds go toward a payback to ratepayers who bailed out CVPS in the 1990s when the company nearly went bankrupt as a result of exposure to high-priced Hydro-Quebec power. Green Mountain Power also on the brink of insolvency at that time sought help from the state. The Public Service Board approved the bailout with the caveat that if the companies were ever sold they would be required to compensate ratepayers. In 2006, when Gaz Metro bought Green Mountain Power, AARP sued over the windfall from the sale and settled on a low income bill assistance pilot program.
Since the CVPS merger deal was announced, advocates for the poor have been torn over bailout issue ‘and the benefits that go with it. AARP wants the money to be paid back in cash; community action councils want the money to shore up weatherization programs.
Green Mountain power would recover the $21 million in weatherization and efficiency investments efficiencies through rates. The money for the projects are included in the â rate base.â
Brock says he doesnâ t like the stateâ s agreement to allow the utility to pay back ratepayers through efficiencies and weatherization. Under the deal, he says ratepayers will subsidize efficiency investments without necessarily seeing the benefits in lower rates.
Several Republicans, Sen. Kevin Mullin, Sen. Joe Benning and Rep. Oliver Olsen, and two Progressives, Sens. Tim Ashe and Anthony Pollina, stood with Brock during the announcement. Olsen, in particular, has been vocal about what he says is â shell game’in which Green Mountain Power says it will offer efficiencies to CVPS ratepayers on the one hand and use rates on the other hand to pay for the program. Read the story by Alan Panebaker.
The senator, however, doesnâ t want the Legislature to intervene in the case, instead he says he wants the Shumlin administration to â do the right thing.’He doesnâ t support an amendment penned by Rep. Cynthia Browning that would require the Public Service Board to return the $21 million to ratepayers as a condition of the merger review, or a proposed resolution from Rep. Tony Klein that would mirror Browningâ s proposal.
The agreement between the state and Green Mountain Power is very similar to the 2007 windfall sharing mechanism that was put in place shortly after Gaz Metro purchased the stateâ s second-largest utility in 2006. It includes an incremental investment in energy efficiency and renewable energy projects that would â provide system benefits through the saving of electricity that flow to all customers, so that even if a customer is not a direct beneficiary, he/she would still receive a benefit,’according to Docket 7213. That deal, approved by the Public Service Board, mirrors the proposal now under consideration. Then, as now, the investments in efficiencies would be included in the rate base.
Brock says just because the state made such an agreement in the past, â two wrongs donâ t make a right.â
The commissioner of the Department of Public Service said in a statement on Tuesday that the agreement it reached with Green Mountain Power over the CVPS payback last week will be beneficial to ratepayers.
â Last week the Department of Public Service won major concessions from Green Mountain Power, reaching an agreement that, if approved by the Board, would result in hundreds of millions of savings for Vermonters,’Miller said. â The agreement reached includes significantly expanded ratepayer savings of hundreds of millions of dollars and more than $21 million in weatherization benefits for CVPS customers.  In addition to these significant savings, the concessions will save at least 50 Vermont jobs, create further employment opportunities, and save Vermonters thousands of dollars on their heating bills.  This agreement has tremendous benefits for Vermonters and the Department is confident in the Public Service Board and their ability to do what is best for Vermont ratepayers.â
The merger deal is worth $702 million. Of that total, $470 million would go to shareholders. About $230 million would be used to pay off CVPS debt. Gaz Metro is also obliged to pay $19.5 million in â break up’and â transaction’fees to Fortis, a rival Canadian utility company that first bid on CVPS and then was edged out by Gaz Metro. CVPS executives who donâ t stay on with Green Mountain Power after the merger deal goes through could receive as much as $24 million in compensation. Bob Young, the former CEO of CVPS, would make $8 million.
Read the VTDigger story about the Fortis deal and details of how the money would be divided up between stockholders and debt obligations.
Read the VTDigger story about CVPS executive compensation.
The sale agreement provides significant benefits for customers, communities, employees and shareholders, including $144 million in customer savings over 10 years, benefits for low-income customers, and the establishment of the Headquarters for Operations and Energy Innovation in Rutland. 
April 3, 2012 vtdigger.org