Senate President Peter Shumlin and Speaker Shap Smith today sent a letter to Senator Cummings, Chair of Senate Finance, and Representative Klein, Chair of House Natural Resources and Energy, requesting that they hold a meeting to analyze Vermont's wholesale electricity market. The legislative leaders had set a deadline of November 1 for Entergy to offer a new power contract for Vermont Yankee. That deadline has now passed without a contract offer. Entergy was not expected to meet that deadline, nor was it clear what the repercussions were going to be if the Louisiana-based company did not meet it.
The Public Service Board needs to approve both a power contract and the proposed license extension. Without the extension, the plant will close on 2012 based on its original license. While the Legislature must also approve a re-licensing, it technically does not have a role in the contract. The Douglas Administration has repeatedly said that the Legislature should vote on the re-licensing in absence of a contract. Electric rates, the administration has maintained, is the responsibility of the Public Service Board. Legislative leaders have been equally adamant over approving a re-licensing, saying that they need to know what they are buying before they buy it.
Meanwhile, Entergy has said that it needs to follow a process by which it get approval first to spin off Vermont Yankee and some of its other, older nuclear plants into a new company called Enexus, on which it was already reached an agreement with the Vermont Department of Public Service. Typically, the DPS acts on the public's behalf and submits its recommendations to the Public Service Board.
However, Entergy said it would have a contract offer ready by last March. Another sticking point apparently has been the low price on the wholesale spot market (about 3 cents per kilowatt hour versus the current Yankee rate of 4.6 cent per kwh). While experts do not believe low prices will last for the duration of a 20-year re-licensing, Vermont legislators, including Tony Klein, have argued that Vermont should not lock into a long-term deal at rates substantially higher than what is available on the spot market. Others point out that that is not the only factor in the contract, which includes a profit-sharing feature which would lower Vermonters' electric rates based on how much electricity and at what cost Vermont Yankee sells power outside the state.
The Vermont utilities argue that there is also a public policy issue here, in that the state must weigh cost versus stability. Both the Vermont Yankee and Hydro-Quebec contracts were vilified in the 1990s as too high. The utilities even tried to break the H-Q contract following the ice storm of 1998 because of a massive power failure, but an arbitrator ruled in H-Q's favor. Now, both contracts are seen by virtually all observers as having been a good deal for Vermont.
Vermont Yankee currently provides about a third of the state's electricity. Under any future contract, that percent is expected to decrease into the 20-25 percent range as Vermont utilities seek to diversify their portfolios. Hydro-Quebec also provides about a third of Vermont's current electric needs.
The letter from Shumlin and Shap is pasted below:
"November 2, 2009
Dear Senator Ann Cummings and Representative Tony Klein,
With Vermont’s two largest power contracts coming to a close in 2012, Vermonters face the potential loss of two-thirds of our power supply. As legislators explore Vermont’s power supply options and begin to make decisions, it is critical that there is a keen understanding of our region’s wholesale electricity market – the history, future forecasts, supply and demand and neighboring region influences.
We request that the Senate Finance and House Natural Resources and Energy Committees hold a hearing in the upcoming weeks to gain a fuller understanding of our region’s electricity market. As we are nearing the 2010 session and a Power Purchase Agreement has still not been reached between Vermont utilities and Entergy Corporation, a comprehensive knowledge of the market and its economic impact on Vermonters is more important than ever.
Thank you for all of your hard work.
Sincerely,
Senate President Pro Tem Shumlin
Speaker Shap Smith"
Vermont legislative leaders request energy summit
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