Energy 2012 recap: State approves Gaz Metro merger of Vermont’s two largest utilities

Green Mountain Power CEO Mary Powell. VTD/Josh Larkin

The Canadian corporation Gaz Métro took over more than 70 percent of Vermont’s electric utility market this year.

In June, the Vermont Public Service Board approved the company’s purchase of Central Vermont Public Service, the state’s largest utility. Gaz Metro merged CVPS with Green Mountain Power, Vermont’s second biggest electric company which it acquired in 2006. The Montreal-based business also owns Vermont Gas, which distributes natural gas via pipeline in Chittenden County.

But gobbling up the lion’s share of the state’s electric market did not come without a fair share of clamor.

One of the hottest debated items surrounding the proposal was the allocation of a $21 million windfall.

In the early 2000s, the Public Service Board allowed CVPS to increase rates to save it from bankruptcy. In allowing the hike, the board stipulated that if CVPS were sold for higher than its book value, the windfall would be shared with CVPS customers who helped bail out CVPS.

The AARP demanded that GMP pay the $21 million windfall back to CVPS customers in cash, but GMP won the battle and is paying the windfall into a state weatherization fund and for energy efficiency projects. By the end of 2013, the utility plans to put $12 million into the weatherization fund, $10 million of which will go to low-income families. The company has already put $6 million into that fund, said GMP spokeswoman Dotty Schnure. In the next year, the company plans to submit a slate of energy efficiency project applications to the Public Service Board for the remaining $9 million.

Another issue that cropped up around the merger was the level of power GMP should have over the state’s utility transmission company VELCO. To address this issue, the merger agreement with the state created the Vermont Low Income Trust for Electricity (VLITE), a nonprofit public benefit corporation.

VLITE has two primary functions: It chooses three directors to represent the public on the VELCO board and it decides how to use dividends from its 38 percent ownership of VELCO stock to create projects that align with the Vermont Comprehensive Energy Plan. In October, VLITE chose three members of the public to sit on the 10-member VELCO board: Michael Dworkin, a former member of the Vermont Public Service Board and the director of the Institute for Energy and the Environment at Vermont Law School, Theresa Alberghini DiPalma, an executive with Fletcher Allen Health Care in Burlington, and Cort Richardson, who runs a business consulting service in East Montpelier.

When GMP merged with CVPS, the CVPS leadership team was let go with $24 million in financial payouts to executives, not including stock options. The value of CVPS shares increased from $24.32 to $35.10 when another Canadian company, Fortis, initially struck a deal with the Vermont utility in May 2011; Gaz Metro offered $35.25 per share in July of that year.

Aside from the executives, Schnure says the company has not laid anyone off. Two CVPS staffers were, however, promoted to executive positions: Greg White became vice president of field operations and former CVPS spokesman, and Steve Costello took over as Vice President of renewable generation and energy innovation. Both executives were additions to the six-person executive team, which is led by CEO Mary Powell, that GMP already had in place.

When the companies merged, GMP expected to eliminate roughly 116 positions through attrition and retirements over the first five years. Since the merger, the company has shed 24 workers, reducing the staffing level from 717 to 693.

One of GMP’s big promises to its ratepayers was a guaranteed cumulative savings of $144 million over 10 years, and for the first time since 1988, the company reduced its rates.

The 0.4 percent reduction comes after rate hikes of 3.2 percent in 2011, 3.11 percent in 2010 and 4.84 percent in 2009. Both GMP and CVPS also applied extra surcharges to ratepayer bills for one year following heavy damage from Tropical Storm Irene.

Vermont Gas, a subsidiary of Gaz Metro, is seeking to run a pipeline from Chittenden County through Addison County along VELCO transmission lines wherever possible. The project is currently before the Vermont Public Service Board. Vermont ratepayers will pay $4 million a year through 2031 toward the $57 million project.