by Timothy McQuiston Vermont Business Magazine The Vermont Public Service Department and Green Mountain Power have agreed on a 5.02 percent rate increase for 2018, with a tradeoff of returning $18.2 million to ratepayers and lowering the rate of return for the next two years. The total rate base increase will be about $80 million. Any deal must be reviewed and approved by the Vermont Public Utilities Commission, which is expected to hand down a decision on or about December 15.
The agreement was made public this month by Montreal-based Gaz Metro, the parent company of GMP and Vermont Gas Systems.
In April 2017, GMP proposed a 4.98 percent rate increase for 2018 and an average rate base of $1,458 million, a $105 million increase from the 2017 rate case. The rate case also includes a provision whereby $18.2 million, corresponding to 50 percent of the synergy savings resulting from the CVPS merger, will be returned to GMP's customers. The public hearings on this filing were held in the fall of 2017. Regulators approved the CVS-GMP merger in June 2012.
Also in this rate case, GMP filed a cost-of-service proposal for fiscal 2018 with the VPUC, providing for a 9.5 percent authorized rate of return on common equity and a common equity ratio of 48.6 percent, to take effect as on January 1, 2018. Unlike in prior years, the period covered by the 2018 rate case will be from January 1, 2018 to December 31, 2018.
On November 9, 2017, GMP and the Vermont Department of Public Service entered into an agreement on the 2018 rate case. The agreement provides for an overall rate increase of 5.02 percent and sets the authorized rate of return on common equity at 9.1 percent for 2018 and at 9.3 percent for 2019. The agreement also provides for an average rate base of $1,433 million, which is below the initially anticipated rate base given the postponement of certain property, plant and equipment investments.
The agreement reflects $20 million of capital voluntarily removed from GMP’s 2018 budget.
In total, the final deal between the PSD and GMP represents $25 million less than the original proposal.
This comes after a fully litigated, traditional rate case over eight months that culminated in the November agreement.
GMP Vice President Kristin Carlson sent VBM this statement regarding the rate case: “GMP is committed to keeping costs as low and stable as we possibly can by being extremely efficient even as pressures continue to call for higher rates. Like many utilities in the region, GMP is experiencing increased transmission, regional capacity and net metering costs. These uncontrollable costs add up to approximately 6 percent in rate pressure, which GMP off-set through operational efficiencies and by delivering additional merger savings to customers. This follows stable rates for several years, including two bill decreases, and even with this rate filing, GMP will have the third lowest overall rates in New England.”
Compared to electric utilities across the nation, GMP also has a relatively low investor rate of return.
Source: Gaz Metro.