Vermont Business Magazine Today, the Vermont Department of Public Service filed expert testimony in the Vermont Gas Systems (VGS) rate case recommending a 5.68 percent rate decrease. Vermont Gas had requested a rate decrease for its customers of 3.3 percent. The testimony filed today with the Public Service Board recommends that no more than $112.5 million of the Addison Expansion Project costs be allowed in rates at this time. The Department also recommends that $5 million from the System Expansion and Reliability Fund (SERF) be returned to ratepayers as part of this rate reduction as soon as the Project is in service. Vermont Gas has said the project will be completed by the end of 2016.
Beth Parent, Vermont Gas Communications Manager, sent this statement to VBM: "Today’s filing is the latest step in the regulatory process – there will be more back and forth. The good news is the Department agrees that providing a rate decrease for customers is the right thing to do. We believe very strongly that our customers should continue to see costs stay low and stable as we finish the Addison Natural Gas Project (ANGP) and begin serving thousands more Vermonters."
Earlier in the day, Parent told WCAX-TV that, "We believe strongly that the costs that we put forward to go into rates, which is $134 million, is accurate and is justified and we look forward to making our case in front of the Public Service Board."
VGS pipeline construction in Williston in July. VBM photo.
According to the most recent filing from VGS, the overall cost of the Addison Expansion Project is $165.6 million. After an extensive review of VGS’s supporting documentation, the Department’s expert found only $148 million to be adequately documented at this time. Because ratepayers should not be responsible for costs that the Company cannot support with reliable documentation, the Department’s analysis began with this $148 million figure. This does not mean the Company can never recover the $17.6 million difference between the claimed and supported costs—just that it cannot do so at this time. The Memorandum of Understanding (MOU) entered into between the Company and the Department last year, as approved by the Board, caps the project recovery at $134 million with limited exceptions.
The Department’s expert next conducted a thorough review of the Addison Project’s planning and development. The result of this analysis is a recommendation that $35.5 million in Project costs be disallowed because they were imprudently incurred. Any disallowance in costs for imprudence is not recoverable in future proceedings, and is borne 100 percent by the Company’s shareholders.
“From almost the beginning of this project, we noted that it was incorrect to assume that all costs associated with the ANGP would be passed on to Ratepayers” said Christopher Recchia, Commissioner of the Department. “Through a rigorous analysis, the Department is able to recommend a 5.68% rate decrease for ratepayers while raising appropriate questions about the prudence of utility expenditures," he added.
VGS initiated this rate case in February with a filing before the Vermont Public Service Board. Under VGS’ proposal, $134 million of the $165.6 million in Addison Expansion Project costs would be incorporated into rates, in recognition of the MOU cap. VGS also proposed a $13.9 million withdrawal from the SERF to achieve a firm customer rate decrease of 3.3%, and an overall decrease of 2.43% for all customers, relying on a larger SERF withdrawal than is recommended by the Department.
Today’s testimony from the Department is in response to the utility’s initial filing.
“Today’s filing represents another step in a process initiated by the rate proposal by VGS,” noted Recchia. “The recommended adjustments to the overall cost of the Addison Expansion Project, based on all the information we have at this time, are fair and result in an outcome that will serve the long-term interests of VGS customers. The recommendation to return $5 million from the SERF strikes the right balance between getting those dollars back to ratepayers while also ensuring that the SERF remains available to help provide stable rates over the next few years as the Project becomes fully operational.”
A schedule for the VGS proceeding has been set with likely resolution of this case in early spring of 2017. The figures in this recommendation as well as the entire outcome of the rate case are subject to change through the discovery process and pending a final ruling by the Public Service Board. VGS will have an opportunity to respond to the Department’s testimony and the Department and other parties will have a chance to respond again before technical hearings, which are presently scheduled for December of this year.
RELATED: Vermont Gas proposes 3.3 percent rate decrease
Source: Vermont Department of Public Service 8.22.2016