Green Mountain Power receives $17 Million in Revenue Sharing from Vermont Yankee

Vermont Yankee

A deal is a deal, so Green Mountain Power gets the money

In 2010, Howard Shaffer and I debated two nuclear opponents on the subject of whether Vermont Yankee should keep operating.  One of the opponents was a very accomplished debater. He stuck to his talking point. He constantly re-iterated: A deal is a deal.  In his view, Vermont Yankee had a "deal" to operate for 40 years, end of story.

He was wrong. The actual Vermont Yankee deal means that Entergy will send a $17 million dollar check to Green Mountain Power. This is revenue sharing for the plant's operation past 2012. Operation past 2012 and revenue sharing were part of the state's agreement with Vermont Yankee.

The Vermont Yankee deal was signed in the Memorandum of Understanding by which Entergy bought the plant in 2002.  This agreement included financial arrangements for Vermont Yankee if it operated after 2012.

The Revenue Sharing Agreement

According to the Memorandum, if Vermont Yankee sold power at prices greater that $61 MWh (6.1 cents per kWh) after 2012, then Entergy had to split the "excess" payments with the utilities from whom Entergy had bought the plant. This revenue sharing was planned to last for ten years, through 2022. The price of 6.1 cents per kWh is sometimes called the "strike price."  It is the price at which the revenue sharing part of the deal kicks in.

Despite all the heartache, lawsuits, local utilities proudly saying they buy no power from Vermont Yankee, local utilities refusing to buy power from Vermont Yankee--Entergy is sticking to its part of the deal. Last year, the price on the grid rose, the revenue sharing kicked in, and Entergy is sharing revenue.

Last week, Entergy wrote a letter to Green Mountain Power saying that Entergy would pay almost $18 million dollars in revenue sharing to the utilities. This  sum was for revenue sharing for March 2013 through March 2014.  Terri Hallenbeck of Burlington Free Press broke the story: VY has parting present for GMP: $17M

What Will Happen to the Money?

According to the Green Mountain Power spokesperson Dorothy Schnure:“It’s great news for our customers...All the money we are entitled to will go to ratepayers.”

Some of us (like me) don't believe Schnure.  Seventeen million dollars is a sizable amount of money for a company with annual revenues of $240 million. More importantly, Green Mountain Power doesn't have a good track record about sharing windfall money.

Last time Green Mountain Power had a windfall, it was supposed to repay ratepayers for a loan.  Specifically, Green Mountain Power was supposed to refund $21 million dollars to ratepayers in the case of a utility merger.  Instead, Green Mountain Power kept the $21 million as a revolving fund. People can borrow from the fund for weatherization projects.

The AARP objected, saying that Green Mountain Power had broken its agreement, and that seniors in Vermont could use some actual money (not loans) in order to offset higher energy expenses.  The AARP was right, but the AARP lost .  A quote from the Vermont Digger article on the AARP appeal:  (Schnure) said, however, that the (Public Service Board, PSB) board had already gone to great lengths in its opinion to explain fully its reasons for denying AARP’s request that money go directly to ratepayers.

I doubt that the ratepayers will get Entergy's $17 million from Green Mountain Power, either. I think the utility will probably find some other way to use the money themselves, or have Efficiency Vermont use it. Green Mountain Power probably won't give it back to ratepayers, who would just spend it in dribs and drabs on whatever the ratepayers want to spend it on! How silly! (Okay, I know, sarcasm alert.)

But that is just my opinion. I'm a blogger. I have opinions.  Onwards to some facts.

Two  facts

First: the Revenue Sharing Agreement was worth something to the state of Vermont. The opponents of Vermont Yankee often claimed that grid prices would remain low for many years, and the revenue sharing agreement was worthless to Vermont.

They were wrong.  I doubt if they will apologize.

Second: This is the end or  close to the end for such payments. There may be another payment to Vermont utilities if local grid prices remain high between now and the end of the year.  But after that payment, there will be no more of these windfalls from Entergy to Vermont utilities.  As Hallenbeck described this payment: it was a "parting present" from VY to Green Mountain Power.

We can thank Entergy for the gift.  We can thank Entergy for living up to their obligations, once again.

We can thank Governor Shumlin and his supporters for the fact that this is a "parting" gift. (If we want to thank them, which I don't.)

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End notes:

"A deal is a deal" statements at the debate. See Howard Shaffer's December 2010 article at ANS Nuclear Cafe: Vermont's Nuclear Debate, Continued. 

Green Mountain Power will get most of this money, but some smaller utilities may also receive checks. The Department of Public Service will do the calculations, as described in the Hallenbeck article.

Obsessive readers of my blog may remember that Hallenbeck is the reporter who asked Governor Shumlin why he thought his memory of discussions about decommissioning was more important than what the state signed about decommissioning in the Memorandum of Understanding. In reply, Shumlin asked her if she was "working for Entergy today." You can hear the exchange in my 2011 blog post: In Vermont, Our Word is Our Bond, So We Don't Honor Contracts.

Green Mountain Power is a wholly-owned subsidiary of Gaz Metro of Canada.

Gaz Metro merger goes forward. Ratepayers stiffed.

Gaz Metro has everything it wanted.  The Green Mountain Power/Central Vermont Public Service merger was approved by the Public Service Board today. The merged companies don't have to give $21 million back to the ratepayers, as they had promised, and as AARP hoped would happen.  The state legislature wanted to intervene in favor of the ratepayers, but they didn't. Governor Shumlin got his ducks in order and the legislators reversed their stands on the issue. They didn't "quibble" (the Governor's words) about the $21 million.  I blogged about the Governor's persuasive powers in Money Settles in Gaz Metro Pockets, Dust Settles Under the Dome.

Yes, the Public Service Board (PSB) ruled to give Gaz Metro pretty much everything it wanted.  You can read the ruling itself here, and a short Alan Panebaker article  in Vermont Digger here. This is the same PSB that allowed another Gaz Metro company to charge Vermont rate-payers for building a gas pipeline, instead of funding the pipeline with Gaz Metro money.

However, when it comes right down to it, I don't blame the PSB.  The Vermont Department of Public Service (DPS) is supposed to be the ratepayers advocate in proceedings before the PSB.  DPS is supposed to protect the ratepayer and it does not protect them. Seems to me that DPS doesn't defend the ratepayers in issues about money--especially money for a Gaz Metro company.   Since nobody is on the ratepayers' side, everything is coming up roses for Gaz Metro.

A Modest Proposal for GMP and Gaz Metro: Use the Shareholder Money

Gaz Metro

Gaz Metro of Quebec, sole owner of Vermont's Green Mountain Power (GMP), wants to acquire Vermont's other electric utility, Central Vermont Public Service (CVPS). This is generally referred to as the GMP-CVPS merger, though I see it as the GazMetro take-over of most of the utility infrastructure in Vermont. (I've got a few links about that at the bottom of this blog post.)

However, there is a problem with the merger. It's the CVPS balance sheet. It turns out that about ten years ago, CVPS made a bad choice buying power from Hydro-Quebec. That power was too expensive for the amount CVPS was allowed to charge its customers so CVPS was about to go broke. It asked for rate relief from the Vermont Public Service Board (PSB). CVPS got that rate relief, but the PSB sternly said that, if anyone ever bought CVPS, CVPS would have to return that rate-relief money: half to the rate-payers, and half to the shareholders.

Half and Half

Opinion from the blogger:

Whoa baby...hold it right there. Why did the PSB decide this? Why was half the money to be returned to the shareholders? It was the ratepayers' money that was keeping their shares from being totally worthless. So couldn't the shareholders simply thank the ratepayers and not expect any "money back" in the future?

Also, people who own stock are used to the idea that some stock prices go up, and other stock prices go down. The shareholders could have sold their CVPS stock and bought something else. They were not locked in to owning CVPS. Ratepayers, poor souls, can't switch utility companies. They just have to sit there and pay the rates.

Well, back to the story as it is evolving now. Back to the present day, when the shareholders will be paid real money, but the ratepayers will be paid in promises.

The AARP Looks at the Merger

In the original plan for the merger, GMP planned to give the money back to the shareholders as cash, but the ratepayers money would be returned as savings in their bills, due to the merger. (You can read the sordid story, including the quick rate raise that CVPS received, in preparation for these supposed savings, at my post Consumers Are Not Protected.) The AARP objected vigorously.

At that point, even the Department of Public Service (DPS) decided it had to do something. It didn't want to do anything too drastic, like insist on giving money back to the ratepayers. However, with great fanfare, DPS announced that CVPS would put the ratepayer money into a fund which would be used to make weatherization loans to some consumers. You can read about this in the Vermont Digger article: Shumlin Administration, Gaz Metro seal merger deal.

A Loan is Proposed, but a Loan is not a Refund

Speaking as an older person myself, I would say that most older people know the difference between

• receiving money that is owed to them
• borrowing more money.

The AARP was not happy with this weatherization loan plan. Greg Marchildon, Vermont State Director of the AARP, wrote in a Brattleboro Reformer op-ed

"The Vermont Public Service Board made very clear in 2001 that the ratepayers who bailed out CVPS with an emergency rate increase had to be repaid. This windfall protection provision that AARP fought for 11 years ago in front of the Public Service Board, is clearly triggered by the merger. The regulators ordered that should the company ever be sold or merged, it needed to pay back ratepayers -- before executives or shareholders profited from the sale. The bailout actually amounted to $98 million, but the Board capped it at $21 million...This is a simple matter of making good on a debt. A matter of fairness.

Instead of refunding the money back to the Vermonters who paid it, the utilities have now proposed creating an efficiency and weatherization program, which satisfies neither the debt, nor the regulator's ruling. GMP actually proposes to set up an efficiency loan fund through a third party that some ratepayers could borrow from to weatherize or make efficiency improvements. Then they would pay the utility back through their bills. Where's the refund in that?"

Emphasis added by blogger

GMP looks at that Pesky Balance Sheet, Apparently for the First Time

Well, GMP/Gaz Metro had never seen the CVPS balance sheet. They were shocked, shocked to find they might have a legal liability to ratepayers. Dottie Schnure, spokesperson for GMP, pretty much admitted this. Returning the money would be a deal-killer.

(Okay, GMP would deny this. GMP would say that of course they looked at the balance sheet. My comments are just my interpretation of Schnure's words.)

According to GMP, having to pay the money back to ratepayers puts the whole deal at risk. Here's a quote from Schnure on VPR:

"The practical outcome of the Legislature getting involved and making a decision on one aspect of a very complex case means that it does put at risk the transaction and potentially the loss of $144 million in savings to consumers."

The Legislature Looks at the Merger

Everything in Vermont gets complicated. Why does Schnure mention the legislature in the quote above?

Quite a few people in the legislature are trying to pass a bill making sure the money goes back to the ratepayer. Perhaps these legislators are concerned with the expenses of ordinary citizens, or perhaps they are concerned with what can happen to them in the next election if they are labelled as going against AARP. At any rate, they are trying to pass a bill to force GMP to refund the money.

However, other legislators and commentators object that the merger is an open docket at the Public Service Board, and the legislature should not get involved in open cases before the Board. That's what the legislature did with Vermont Yankee, and they ended up losing a court case about it.

You can see links to both sides of this question in the Vermont Tiger article: Interesting Debate.

A Modest Proposal

I have a different proposal. A very modest one. All the current excitement is centered on how the ratepayer money gets handled. Sending cold cash to the shareholders is treated as a given. I don't see why that should be the case. After all, it was ratepayer money that bailed out the shareholders when CVPS was on the verge of bankruptcy, and got emergency rate relief.

My proposal is simple.

• Start the loan fund with the shareholder half of the money, so the shareholders will contribute to weatherization in a positive way...the same way the Shumlin administration thinks the ratepayers should contribute. This should make the shareholders happy. After all, this plan was supposed to make the ratepayers happy.
• Next, send the ratepayer money right back to the ratepayers, as cold cash. These actions will keep the same money outflow rate as the current scheme, which should make Green Mountain Power happy. It's not a deal-killer. Some money (the shareholder money) will fund weatherization, which should make the DPS happy. The ratepayers will get their money as money, not loans, which will make AARP happy.

In other words, this scheme will spread happiness all around!

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Portrait of Jonathan Swift, of Modest Proposal fame, from Wikipedia

The Gaz Metro Merger: The Consumers Are Not Being Protected

About the Public Service Board

In my most recent post, I urged people to look at the questions the Public Service Board (PSB) has asked Vermont Yankee, and make comments to the Board.

In today's post, I show that the Public Service Board and the Department of Public Service have not protected consumers about other utility issues. This post was published first in True North Reports, and is updated here. When we write the PSB about Vermont Yankee, it is worth knowing some related history.

If you don't have time to keep reading this post, here's the summary:

Question: Are Vermont consumers being protected by the Public Service Board (PSB) and the Department of Public Service (DSP)?

Answer: No

The Merger

Green Mountain Power (owned by Gaz Metro) plans to merge with Central Vermont Public Service. If this merger is approved, Gaz Metro, a Canadian gas pipeline company will own or control most of the energy infrastructure in Vermont. They will own the two electric distribution companies and the gas distribution company (Vermont Gas Systems). They will also (probably) control the two large transmission companies, TRANSCO and VELCO.

The Agencies That Protect Consumers in Vermont

Vermont has two agencies that regulate utilities and protect consumers. Vermont’s Public Service Board (PSB) oversees utility actions and sets rates. The Department of Public Service (DPS) acts as the consumer advocate in cases before the PSB. If these two agencies do their job, Vermont citizens should feel comfortable, no matter who owns the utilities.

Unfortunately, PSB and DPS are not doing their job to protect ordinary citizens and ratepayers.

Conflict of Interest at DPS

DPS is charged with protecting consumers, and many people are concerned with Shumlin’s appointment of Liz Miller as Commissioner of the DPS. Ms. Miller’s husband is managing partner of the law firm that represents Green Mountain Power, a conflict of interest situation that puts her actions as Commissioner in doubt.

Senator Vince Illuzzi was particularly concerned that Miller would not be able to do an appropriate job of supervising the merger. A major issue is preventing Green Mountain Power having monopoly control of the transmission companies. Such control by one massive company could hurt all smaller utilities. Illuzzi filed interventions at both the federal and state levels, asking for an independent counsel to supervise the merger. Many small Vermont utilities joined his interventions.

In response, the state appointed Michael Dworkin to study the matter. Dworkin made some recommendations on managing the transmission companies. Meanwhile, Ms. Miller said that the governor expected DPS to “kick the tires” on the merger deal.

However, even the appearance of conflict of interest can make DPS actions look biased. No matter how fair Miller tries to be, and how many tires she kicks, she is a Commissioner whose husband’s law firm represents one of the biggest players in the merger. Dworkin only studied one aspect of the merger case: the transmission companies. There are other issues about companies that Gaz Metro owns or will own, and these issues directly affect consumers.

Regulating the Pipeline

Gaz Metro (owner of Green Mountain Power) had another docket before the PSB recently. Gaz Metro plans to expand its Vermont Gas Supply pipeline from Burlington to Rutland. The docket before the PSB included the question: whose money will be used for this expansion? Surprisingly, PSB has allowed the pipeline company to raise rates on existing customers in order to extend the pipeline from Burlington to Rutland.

Not everyone of the PSB was in favor of raising the rates to consumers before the pipeline is built. Board member John Burke said that taxing Vermont ratepayers before they get any benefit was "unfair and improper.” Burke pointed out that Gaz Metro has hundreds of millions of dollars available for investment. He was overruled by the others on the board. Existing customers will pay for the new pipeline, even though these customers are already served by a pipeline. Existing customers will see higher gas rates, but will have no personal benefit from the pipeline expansion. The benefit goes to Gaz Metro, which will be able to build a longer pipeline without spending its own money.

Update: Gaz Metro just negotiated a $600 million dollar line of credit agreement. They have plenty of money to build the pipeline without being financed by Vermont ratepayers.

DPS, the designated protector of the consumer, did not take a stand on this case before the PSB.

Following Some Old Money on the Merger

There are other situations in which the ratepayers are not being protected. Since DPS did not step in to protect consumers, AARP is intervening about electric rates in the proposed GMP-CVPS merger.

To understand the AARP intervention, we have to follow some old money. Years ago, the PSB granted Central Vermont Public Service a rate increase, but the PSB stipulated they had to give that money back to the shareholders and rate-payers if their company was purchased. Half the rate increase money was to return to the shareholders, and half to the ratepayers. Since Central Vermont Public Service (CVPS) is now expecting to be purchased by Green Mountain Power, CVPS is obligated to give the money back to these two groups.

CVPS plans to give immediate per-share payments of $10 to their shareholders (share-holders half) while paying back the rate-payers by lowered rates due to the supposed $114 million savings from the merger over a 10 year period (rate-payers half).

Paying back the rate-payers through merger-caused savings is not going to be real money, not like a $10 bill in the shareholder’s pocket. PSB recently gave CVPS a rate increase of 4.8%, or approximately $17 million per year.

This new higher rate will more than offset the $11 million dollar per year “savings due to the merger” that CVPS expects to pass on to customers. AARP is intervening in the merger docket to protect low-income seniors (and everyone else). The DPS has not intervened.

DPS has not intervened to urge the PSB to protect the ratepayers in the gas pipeline or CVPS returning money they are obligated to return to ratepayers. Why not?

Update: The latest updates from AARP imply that the consumer rebate situation is even worse than I described. Two links:

• an article in Vermont Digger shows DPS intervened to make the merger look better (without changing the terms).
• an op-ed yesterday from the AARP asking Gaz Metro/GMP to pay its debts.

Conflict and the Appearance of Conflict

Conflict of interest is impossible to prove. If the Commissioner were not married to a lawyer whose firm represents Green Mountain Power, the DPS might well have taken the same stands. DPS might have approved of pipeline financing by existing customers. They might have been fine with CVPS plans to return money to shareholders with a check and return money to ratepayers through questionable future savings. No one can say that DPS acted this way because of this, or because of that.

However, once again, we are back to the reasons that governments and judges attempt to avoid even the appearance of conflict of interest. With conflict of interest in the background, all decisions the government makes have the possible taint of bias.

Governor Shumlin is an astute politician, and he should take notice of these concerns. For any rate case involving a current or potential subsidiary of Gaz Metro, owner of Green Mountain Power, Governor Shumlin should appoint an independent counsel as consumer watchdog. He should ask Ms. Miller to step aside for that case, since her husband is an executive in a law firm representing Green Mountain Power. The independent counsel should do some serious watching over consumer pocketbooks!

If he does not take this type of action, Shumlin is just handing ammunition to his opponents.

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Earlier articles in this blog have described concerns with this merger. The probable monopoly ownership was covered in Who Owns the Infrastructure. Some conflict of interest concerns were covered in Governor Shumlin and GMP. This article focuses on the probable effect of these mergers on consumers.

I wrote this post for True North Reports. I am grateful for the opportunity to reprint in this blog.