Green Mountain Power today presented a plan to the Vermont Public Service Board that would increase rates 2.46 percent starting this October 1 and increase them again a maximum 2.5 percent in fiscal 2015. The two-year strategy is to offset a $24 million increase in regional transmission costs.
The stabilization strategy is contained in a filing with the PSB that endeavors to smooth out the $24 million increase in regional ISO-New England transmission costs and higher VELCO costs due to infrastructure investments to increase system reliability in Vermont. GMP stated that these costs, if not addressed, would have sharply driven up GMP customer rates by at least 4 percent for fiscal year 2014 beginning on October 1, 2013.
Instead, GMP and the Department of Public Service (which advocates for consumers before the PSB) agreed to the proposal that minimizes the impacts of transmission costs, the primary driver of utility cost increases over the next two years. Every state is required to share in the regional costs that are stated to be necessary for the reliability of the New England grid. Green Mountain Power’s transmission obligation for 2014 is $24 million higher than in the current rate year (FY13).
‘Regional transmission costs are increasing significantly, and can vary widely year to year,’said Department of Public Service Commissioner Christopher Recchia in a statement. ‘We are very pleased at the agreement we’ve reached because the rate change would have been much higher in 2014 otherwise,’he added. ‘No single state or utility has control over these regional transmission costs, and that is why we are working with other states and stakeholders in the region to push for non-transmission alternatives and better planning to reduce regional transmission costs going forward. The Department also believes that customers benefit from a predictable and stable rate structure, and that is why we negotiated an MOU that lowers the rate increase in 2014 to 2.46 percent, and places a cap on any proposed increase for 2015 at 2.5 percent,’Recchia said.
‘We are pleased that through this effort - deferring some regional transmission costs and controlling other costs ‘we yield significant savings for consumers, and that we are able to control rate increases for this year and next to no more than roughly the rate of inflation’ said Recchia. ‘Providing stable and low rate impacts, even in the face of significant regional transmission costs, is good for consumers and businesses throughout Vermont.’Recchia said.
If the stabilization strategy is approved by the Public Service Board, customer rates would increase by 2.46 percent beginning on October 1, 2013. The exact cost impact for the second year of the plan will not be set until October 1, 2014, after a ‘top-to-bottom’review by state regulators. GMP agreed that the maximum increase for the year beginning October 1, 2014, would be no more than 2.5 percent and could be less.
Win Smith, owner of Sugarbush Resort in Warren, Vermont, said in a statement, ‘It is especially important for a ski area to be able to plan with some certainly what its future energy costs will be. I appreciate all the hard work GMP has done to keep the upcoming increases relatively low, especially compared to many other cost pressures we face.’
A major component of the new two- year plan is the guaranteed $13 million in merger savings (with Central Vermont Public Service) over the two- year period, which played a significant role in controlling costs. This is on top of the $2.5 million in merger savings included in current operations.
‘We are demonstrating every day that operating as one company saves our customers money,’said Mary Powell, president and chief executive officer of Green Mountain Power. ‘In the face of significant increases in regional and local transmission costs, our diligent work to serve customers more effectively combined with our guaranteed merger savings of $13 million means that our rate plan is at least two percentage points lower than it would have been without the merger.’
The imposed increase in transmission costs, along with increases in property taxes and necessary investments for reliability and new energy generation was moderated, GMP stated, by Green Mountain Power’s intensive management effort to reduce costs in other areas. This includes power supply costs that were slightly lower, savings from the implementation of smart grid technology, and importantly, $13 million in guaranteed merger savings.
‘The Green Mountain Power team is incredibly focused on providing cost-effective, highly reliable and friendly service to its customers,’said Powell. ‘Over the past year, thanks to merger efficiencies and smart grid technology investments, our response during storms has become faster and more efficient. We are pleased to see our customers benefit from the changes we are making, from both a financial and a service perspective.’
The two-year plan has the effect of offering customers more stable rates, as single-year rate filings would have called for a higher increase this year, and less of an increase next year. It also provides more predictability in rates, which is especially helpful for business customers as well as homeowners in planning budgets.
GMP stated that future rate changes will benefit from the guaranteed $144 million in savings Green Mountain Power promised in the first 10 years of the merger. This includes the upfront savings of at least $15.5 million in the first three years following the merger.
Source: Green Mountain Power. 8.1.2013. Green Mountain Power generates, transmits, distributes and sells electricity in Vermont and is a leader in wind and solar generation. The Company, which serves more than 250,000 customers, has set its vision to be the best small utility in America. For further information, visit www.greenmountainpower.com.
TOP PHOTO: GMP trucks head down to Connecticut last November to assist in storm recovery. Courtesy photo.