Cronyism Drives Vermont’s High Energy Prices

by Robert Maynard

In a letter to Washington County’s three State Senators, the Campaign for Vermont’s Tom Pelham urges them to vote for S.30 and notes that cronyism plays a role in Vermont’s high energy prices: “Part of the reason Vermont’s rates are so high is that ratepayers have been forced by legislative and Public Service Board mandates to subsidize and buy expensive electricity from renewable producers like Mr. Wolfe. Given Vermont’s energy plan of 90 percent renewable electricity versus the current 25 percent, it appears our future is on a course toward even higher and higher electric rates.”

In the letters section he was asked for more clarification on this and other assertions.  He was his response:

Let’s start with the current point in time and recent trends to give perspective on Vermont’s electric rates. You’ll see that Vermont is the “sore thumb “of electric rates not only in New England, but in the nation.

Per the December 2012 data in the USEIA link above, Vermont’s all-sectors rate at $.1456 per kwh was 4th highest in the continental United States, exceeded only by Alaska, Connecticut and New York, and a whopping 51% higher than the national average of $.0965 per kWh. Further, Vermont’s residential rate at $17.82 per kWh is the highest in the continental U.S. Electricity is an essential commodity for Vermont’s economy and our current rates are clearly far outside the competitive mainstream and further aggravated by the 8% rate of return on equity that gets shipped across the border to Gaz Metro annually.

Additionally, you can see from the USEIA data that both Vt’s all-sectors and residential rates have increased while those in New England have decreased. Vermont’s all-sector and residential rates rose by an extraordinary 11.6% and 13.4% respectively over the last year while New England’s comparable rates dropped by 1.3% and 1.4% respectively. You can go back and check the data for the last four or so years and you will find this annual trend in place.

If you can find a silver lining in this profile, go for it, but payment of a 51% premium for the basic commodity of electricity is certainly a financial burden for residential and commercial interests, especially with the trend moving in the wrong direction. If Vermont were more in the mainstream of electricity rates, burdening our rates with subsidizes for expensive renewables might be more palatable, but with our economy in a stall (this January’s employment level was equal to that of January, 2005; we have near zero population growth and young families are on the decline), higher electric rates don’t help. In addition to renewal subsidies, the legislature and PSD have recently added tens of millions of charges to Vermont’s electric rates to subsidize the electric bills of low income households and fund Efficiency Vermont. The Efficient Vermont charge was recently increased to just above 6% of the base electric rate and the low income subsidy meter charge was just added a couple of months ago.

As to your core question of the impact of renewable subsidies on Vermont’s rates, I wish I had the comprehensive data to fully answer your question, but I know of no central repository that profiles the collective array of available subsidies (feed-in-tariffs, sales and income tax deductions, depreciation allowances, guaranteed rates of return, Clean Energy Fund, etc.) and their values. Further and contrary to the demands of transparency, on a project basis, I understand this information is behind a wall of secrecy at the PSD due to “proprietary” reasons. Given this however, here’s what is evident.

You can go here (see Table 8) and see that for 2010, USEIA says that 5,595 MWh of electricity were retailed in Vermont for $741 million. These numbers were close to those submitted to the House Natural Resources and Energy Committee last session by GMP profiling the financial impact on rates of Feed-in-Tariffs (FIT) state-wide. GMP’s data showed 5,894 MWh in retail electric supplied at $796 million for an average retail rate of $.135 per kWh. Relative to the only first 50 MW of FIT deployment authorized by the legislature, GMP estimated on a state-wide basis the FIT projects would supply 87,285 MWh/year, or 1.5% of electricity supply, at a net rate of $.195 per kWh above market, costing consumers $17.27 million and resulting in a rate increase of 2.2%. After application of REC’s, the increase would be 1.8%.

The above is just a profile for one of the subsidies for renewables and that provide only 1.5% of needed supply. Now ponder the growing cost of this subsidy alone and its effect on ratepayers as the state moves forward to increase our renewable profile from the current 25%-30% of supply to 90%. And, consider the effect this will have on the Vermont economy especially given our current rates are at the nation’s top already.

Further, the material impact on rates of renewable subsidies can be found in elsewhere.

Here you can see that in addition to renewable subsidies embedded into the base rate such as feed-in-tariffs, the additional allocation of renewable supply to a GMP customer costs an added $.03 per kWh, or a 20% premium over the base rate.

Here you can see the rates for Washington Electric Co-op, likely the most “green” utility in Vermont with no relationships with nuclear power and significant interests in power generated by land-fill methane and ridgeline wind. These rates are higher than Vermont’s averages, which as we’ve seen, are tops in the country.

Regarding my thoughts on operating costs for electric vs fossil fuel vehicles, you can go to the link below. Let’s hope for expanded usage but their initial capital costs, their range and recharge times and convenience and rising electric rates are certainly barriers for most Vermonters. The emergence of cheap natural gas to fuel transportation is an additional challenge. The fact that few of these are on the road, even among state house environmental activists, speaks volumes.

Regarding efficiency, I fully agree. It’s zero carbon and cost effective. As for me, I use about 250 kWh of electricity a month and have super insulated my south facing home. By cheap electricity, I meant relative to where Vermont is now, fully understanding we’ll never be mere average.

One thought on “Cronyism Drives Vermont’s High Energy Prices

  1. With Quebec’s government run power and energy utilities now monopolizing Vermont’s needs, Vt Gas and the New politically connected GR MTN Power, we have almost no choices, which is the usual result with Guvmont making all our choices for us. Natural gas and Nuclear are the clear choices for both reasonably clean and inexpensive electricity and building heat.
    I have often advocated for replacing Yankee with a breeder reactor to reenergize our fuel rods, and a second nuclear electric along the lake where our populationa and industry is concentrated.
    Relying on fragile “the Grid”, these brutally expensive unreliable “renewables” and exporting our power needs has been a very dangerous and damaging path for Vermont!

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