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Vt. has direct line to low power costs

MONTPELIER, Vt. - What a difference a decade makes. In 1996, Vermont’s long-term power-purchase contract with Hydro-Quebec looked too expensive and like a bad idea.

Bringing retail competition to the electric industry looked like a great idea.

And the state’s two major power companies were worried about the risks of owning an aging nuclear plant.

Fast-forward to now.

Today, Hydro-Quebec is a bargain compared with what most New England utilities are paying for wholesale power, and the Douglas administration is trying to patch up a cross-border relationship some see as damaged by Vermont’s earlier complaints.

Retail competition in the five other New England states hasn’t panned out as hoped, as utility requests for double-digit rate increases - some as high has 60 or 80 percent - have become the norm.

And the deal Vermont’s two biggest power companies made to buy back Vermont Yankee power when they sold the plant in 2002 is keeping some of the region’s cheapest electricity flowing into the state.

"Five years ago, we were being vilified for Hydro-Quebec," said Steve Costello, spokesman for Central Vermont Public Service Corp., the state’s largest power company. "Today, we’re being praised up and down. Things can change very quickly in this industry."

Just as how good a deal a home buyer got depends on what the neighbors paid, Vermont’s current electric rates look good... more [truncated due to possible copyright]  

 Bringing retail competition to the electric industry looked like a great idea.

 And the state’s two major power companies were worried about the risks of owning an aging nuclear plant.

 Fast-forward to now.

 Today, Hydro-Quebec is a bargain compared with what most New England utilities are paying for wholesale power, and the Douglas administration is trying to patch up a cross-border relationship some see as damaged by Vermont’s earlier complaints.

 Retail competition in the five other New England states hasn’t panned out as hoped, as utility requests for double-digit rate increases - some as high has 60 or 80 percent - have become the norm.

 And the deal Vermont’s two biggest power companies made to buy back Vermont Yankee power when they sold the plant in 2002 is keeping some of the region’s cheapest electricity flowing into the state.

 "Five years ago, we were being vilified for Hydro-Quebec," said Steve Costello, spokesman for Central Vermont Public Service Corp., the state’s largest power company. "Today, we’re being praised up and down. Things can change very quickly in this industry."

 Just as how good a deal a home buyer got depends on what the neighbors paid, Vermont’s current electric rates look good mainly in comparison to those elsewhere in New England.

 For utilities in other states, much of their power comes from plants elsewhere in the region powered by natural gas and subject to that fuel’s great price volatility.

 In contrast, "our long-term Vermont Yankee and Hydro-Quebec contracts are providing tremendous value relative to the market," said Chris Dutton, president and CEO of Green Mountain Power Corp.

 The bottom line for Vermont customers has been relatively stable electric rates. GMP spokeswoman Dorothy Schnure said her company had raised rates a total of 3 percent in the last six years. Costello said a CVPS customer who paid $89.95 in a monthly bill for 700 kilowatt-hours in 1999 now pays $94.84 for the same amount of power.

 "I’d rather be in our position than that of our neighbors," said David O’Brien, commissioner of the Department of Public Service, in an interview this past week.

 Key to Vermont’s current position, said several people in and around the power industry, is a decision by the Legislature in 1998 not to follow the rest of the region to what was then called electric restructuring.

 Utilities that had been "vertically integrated," owning power plants, transmission and distribution systems, as well as exclusive rights to sell to customers in a given territory, were being dismantled. They also had been fully regulated, with state commissions conducting periodic studies of what the companies’ costs were and then allowing them to recover those costs, plus some profit, in the rates they charged consumers.

 Taking their place were national companies building or buying up generating plants, separate transmission firms and what were hoped to be a wide variety of new retail electric companies. Predictions were widespread that fuel dealers, telephone companies and others would get into retail marketing of electricity. In Maine, an interfaith church group even did so.

 But for the most part, the retail electric industry has been a dud, said Richard Sedano, O’Brien’s predecessor, who now works with the Regulatory Assistance Project Consulting group. Most consumers had little interest in shopping around for power and ended up staying with their "default" utility.

 Meanwhile, the wholesale generation market was left to try to create itself in a void. There was an initial burst of enthusiasm in which most New England states - but not Vermont - saw the construction of new gas-fired power plants. Existing power plants - including a series of power dams on the Connecticut River - were snapped up by newly created generation companies.

 But no longer would state regulators guarantee that the costs of new generating stations would be recovered from ratepayers. Some of the high prices paid for generating stations could not be recovered by selling power at wholesale. Companies went bankrupt. Investors got the jitters. New power plant construction ground to a halt.

 It has all been a cautionary tale from O’Brien’s perspective. He said he wonders about the rush to embrace market forces.

 Commissioner of the Department of Public Service under the Republican administration of Gov. James Douglas, O’Brien said, "I’m pretty much a free-market kind of guy. But there is such a thing as a natural monopoly. You really have to wonder whether this thing (the electric industry) lends itself well to market solutions."

 Former state Sen. Cheryl Rivers, D-Windsor, was chair of the Senate Finance Committee in 1997, when utility officials brought to her and other lawmakers their proposal to restructure Vermont’s electric industry.

 She and her fellow Democrats who controlled the Senate let the bill pass, but not before loading it up with consumer protections.

 Utility lobbyists vowed to fix the bill in the House by removing what they saw as some of the more onerous Senate provisions. But after a special summer study committee grappled with the issue, then-House Speaker Michael Obuchowski pulled the plug on power industry reform.

 Rivers said Obuchowski was not known as a speaker to throw his power around, but that he did spend some political capital seeing that the restructuring bill died.

 "The citizen Legislature deserves some credit," Rivers said. "We weren’t experts, but we did our best to look out for the people, and at the head of the class was (Obuchowski)."

 O’Brien said there’s another lesson as well: When it comes to utility planning, it’s wise to hedge your bets. A diversified portfolio of power sources will keep consumers from enjoying the maximum benefit from favorable market conditions for one type of generation. But it will also protect them from price shocks when a source too heavily relied upon becomes a bad deal.

 Most of New England got too excited about natural-gas-fired generation in the late ’90s, he said.

 "Folks were really kind of heading down one path, and when that path didn’t pan out because of higher natural gas prices, they were hit with very big increases."


Source: http://www.seacoastonline.c...

JAN 22 2006
https://www.windaction.org/posts/1038-vt-has-direct-line-to-low-power-costs
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