Utilities, IPPs agree on $11+ million settlement

Ending years of often bitter litigation, 14 Vermont utilities and the state’s independent power producers on January 29 filed a proposed settlement that would save Vermont consumers between $11 million and $45 million, according to a statement released by the utilities and the Vermont IPPs. The Public Service Board would have to approve the agreement.
The settlement would initially reduce power costs for the 14 utilities by $11 million to $15 million, or 5 to 8 percent annually, over the next 10 years. The parties also agreed to work together to seek legislative approval for securitization of remaining IPP costs, which would save an additional $20 million to $30 million for ratepayers.
Securitization is the issuing of bonds to buyout or buydown the future value of the contracts of the small power producers. The interest rates on the bonds would be about 4.5-5.5 percent per year. Ratepayers would pay the principal and interest through an extra charge on bills determined by their amount of electricity use. The cost difference would save ratepayers $2-3 million per year over the next 10 years.
The initial power cost reductions will go forward, pending Public Service Board approval, regardless of securitization. Securitization requires passage of a bill now going through the Legislature that would allowing the PSB to grant it.
The IPPs are small power producers, commonly hydro generating plants, whose wholesale rates to utilities are generally much higher than that of regulated power producers.
The initial savings include: $6.69 million from reducing and eliminating some security requirements for the IPPs and $3 million in direct revenue reductions for the IPPS. Changes in dispatch plans at Ryegate and possibly Missisquoi IPPs will provide at least $1 million, but that figure could rise to $2 million to $4 million.
The benefits of the settlement would be distributed to the 14 utilities based on the share of energy they provide.