by John McClaughry
On June 15 the Public Service Board issued its long-expected order agreeing to the consolidation of Central Vermont Public Service and Green Mountain Power into a new “Combined Company”. The new entity, serving 256,000 Vermont electric customers, will be owned, ultimately, by the government of Quebec.
Every party submitting views to the Board supported the merger. That was because the consolidation of the service territories and operations of the two utilities will unquestionably result in large efficiencies, some $500 million over twenty years if one believes the PSB.
The deal dates back to the November 2010 offer by a Canadian energy company called Fortis to buy CVPS. The CVPS directors agreed to Fortis’s offer.
But suddenly Gaz Metro, owner of Green Mountain Power, appeared with a better deal. After several frantic weeks of offers and counteroffers, Gaz came away the winner. Its much larger combined company would produce much lower power costs for Vermont customers, than Fortis merely replacing the ownership of the present CVPS.
Gov. Shumlin early saw the prospective savings as a boon to Vermont ratepayers – but also as a huge pot of money that the state’s regulator machinery could divert to fund some of his favorite government programs.
Thus Shumlin’s Department of Public Service pushed Gaz to agree to shift $10 million of the savings into weatherization programs, plus another $2 million into promoting “thermal efficiency”. These programs are run by the state’s community action agencies. In all, the combined company will donate $21 million to weatherization and a new entity called the CEED (Community Energy and Efficiency Development) Fund.
This happens to be the $21 million owed to CVPS ratepayers under an earlier PSB order, to make sure ratepayers shared in the big payout if CVPS was bought or merged. The Governor and the Department urgently argued that giving back the money to CVPS ratepayers, as clearly required a decade ago, would be a waste of good money that the government could better direct to finance “societal benefits”.
To justify this theft, the PSB found that “the expense of providing this windfall recovery to CVPS ratepayers would put at risk all the extraordinary actual and potential benefits of the merger for ratepayers and the citizens of Vermont.”
Whoa! The Board is saying here that Gaz Metro would walk away from a deal supposed to yield $500 million in benefits over 20 years, if the Board required Gaz to peel out $21 million to pay off those annoying ratepayers?
Gaz was so eager to make the deal that it kept raising its bid price, and agreed to pay Fortis $19.5 million just for going away. Does anyone seriously believe that Gaz would walk away from this enormously lucrative deal in a dispute over a lousy $21 million?
Probably not. The key thing to remember is that in addition to a promised $144 million in direct ratepayer benefits over ten years, the merger deal offered the governor a chance to get his hooks on millions of dollars to fund his pet projects, without hitting up the taxpayers or snatching it from some other budget item.
One of the fashionable items that the new CEED Fund will feed is “renewable energy subsidies”. An expert for the DPS suggested, for example, that the Fund might subsidize installation of electric vehicle charging stations at private homes. This would be a great convenience to people who have just bought a Chevy Volt subcompact ($40,000, less the proposed Obama $10,000 point of sale subsidy), not to mention a Fisker Karma ($102,000). Some might say that they ought to install the charging stations in their own garages at their own expense.
The DPS also envisions the CEED Fund shifting money into Shumlin’s pet Clean Energy Development Fund. The CEDF is now out of money because Entergy is no longer making its annual extortion payment, which the Fund formerly used to finance residential solar electric systems for tax shelter seeking upscale limited partnerships.
Time was, not long ago, when the PSB passed expert judgment on utility structuring and power purchase agreements solely on the least cost for bringing electricity to Vermont’s consumers. Now it is steadily moving further, parceling out cash flow from a major utility merger to dubious programs based on political interests, in this case, those of the Governor.
The PSB’s Order refuting the AARP argument for giving the $21 million back to the people who have a right to it, shows how far the Board has bought into that new role. The DPS/PSB part of state government has become a prime example of “taxation by unaccountable strangers”.
John McClaughry is vice president of the Ethan Allen Institute (www.ethanallen.org).