MONTPELIER, Vt. --For decades, environmentalists pushed to remove a Lake Champlain tributary dam blamed for killing off walleye, sturgeon and salmon.

Finally, in 2003, owner Central Vermont Public Service Corp. worked out a 20-year plan to eliminate Peterson Dam, at the urging of former Gov. Howard Dean. The agreement capped nearly two years of contentious talks between state agencies, environmental groups and the utility.

Now, the state Public Service Board is refusing to approve the money that would have gone to the utility for removing the dam in Milton, a few miles upstream from where the Lamoille River flows into the lake.

The board said it had to weigh the benefits to fish against the environmental benefits of generating enough power for 3,000 typical Vermont homes without discharging greenhouse gases into the atmosphere, citing a 2005 law that calls on the state to get an increasing share of its power from renewable sources.

Recent cases involving wind power projects "have illustrated the difficulty in siting renewable energy projects in Vermont," the board said. "Although Peterson Dam does not constitute a new renewable generation source" like those envisioned in Act 61, "it is a stably priced, existing renewable energy source that state policy declares should be 'retained and supported'."

The board didn't reject the dam's removal, per se. But it rejected what CVPS considered a key part of the agreement, which is a guarantee that CVPS would be able to bill ratepayers for millions of dollars in costs associated with removing the dam.

CVPS spokesman Steve Costello said power from the Peterson Dam costs about 2 cents per kilowatt-hour to produce, a fraction of the cost of wholesale power elsewhere in New England. Its output would have to be replaced with more expensive power, and the company wanted guarantees that it could pass those costs onto ratepayers.

CVPS, which wanted to leave the structure in place, reached the settlement to end litigation over it, at the behest of Dean, who supported its removal, the company said.

Dean, who is now chairman of the Democratic National Committee, couldn't be reached for comment Wednesday. A call to his home was not immediately returned.

Jon Groveman, a lawyer for the Vermont Natural Resources Council, which had fought for the dam's removal, said his group was disappointed.

Groveman said VNRC had had extensive internal discussions about the need to stem global warming and the competing need to remove the dam to help fish populations.

The group concluded that because the dam is located only 5.5 miles from the lake, its removal should have taken precedence.

"It's the worst possible place for a dam," said Groveman, who said his group hadn't decided whether to fight the board's decision.