May 21, 2012

Legislative wrap up: Energy stances on renewable investments, merger payback, opt-out fee for smart meters and state transmission ownership lost steam

The most prominent energy issues in the Vermont Legislature this year seem to be the ones that didn’t happen.

For what seemed like half the session, lawmakers quibbled over whether to intervene in a Public Service Board docket to require utilities to give $21 million in windfall money to ratepayers. That legislation never came to fruition.

The House spent a large part of the session polishing a law that would require the state’s utilities to purchase set amounts of renewable energy. That big energy bill barely made it through, and when it did, the renewable energy mandate was stripped out.

And the state led the nation in banning the controversial practice of hydraulic fracturing for natural gas.

In the end, the Legislature passed an energy bill and decided not to meddle in the affairs of the Public Service Board. And it sent a resounding message to the natural gas industry: frack no.
The Merger Windfall Money

No issue appeared to stir more controversy this year than the debate over whether the state’s two largest utilities should be allowed to recoup millions of dollars in windfall money once they merge.

The controversy hinged on whether the Legislature should direct the Public Service Board, a quasi-judicial entity, on how to deal with the issue.

A group of four lawmakers in the House and many in the Senate fought hard to ensure that Green Mountain Power and Central Vermont Public Service Corp. could not recover money in rates that was supposed to go to their customers when they enter a profitable merger.

Gov. Peter Shumlin and House Speaker Shap Smith opposed the legislative intervention, and in the end about 50 lawmakers signed a letter to the Vermont Department of Public Service asking the agency and utilities to consider their concerns.

The controversy stems from the 1990s when the state utilities entered a losing contract with Hydro-Quebec. In 2001, when they were on the verge of bankruptcy, the Public Service Board allowed the utilities to raise rates on the condition that if they were sold they would have to share profits with ratepayers, hence the $21 million. In 2007, when Green Mountain Power sold to Gaz Metro, a Canadian utility, it invested that windfall money in an efficiency fund and recovered it in rates. An agreement with the Department of Public Service would allow a similar mechanism with the pending merger. Around $12 million would go to weatherization programs.

Once lawmakers realized the utilities would get that money back through rates, it turned into a juggling act of trying to pass some sort of legislation that would demand a cash payout or rebate to ratepayers without undermining the board’s authority.

When the final gavel fell, none of these measures made it through.

The Senate had attached an amendment to the budget that would not prohibit the utilities from recouping the money in rates. That language came out in a conference committee.

The House passed a similar amendment on a Public Service Board housekeeping bill that would not allow utilities to recover in rates investments in weatherization that did not benefit the electric system (like home insulation projects where the homeowner heats with fuel oil). That bill never made its way out of the Senate.

When all was said and done, the governor and his administration got their way. The Public Service Board will be the final arbiter.
State Ownership of VELCO Study

Three senators championed a bill that would require the state to study the feasibility of state ownership of up to 51 percent of the state’s electric transmission system.

Sens. Tim Ashe, Vince Illuzzi and Peter Galbraith proposed looking into government ownership of Transco, the state’s transmission assets, and Vermont Electric Power Co. (VELCO), the utility that oversees Transco. Governance of that system is based on how much of the retail market share utilities have. After the merger, Green Mountain Power and CVPS, both owned by Gaz Metro, would control the transmission system.

The Vermont Department of Public Service struck an agreement with the utilities to divest part of that control and allow for “public good directors” on the VELCO board.

But the senators said the state should try to take advantage of the favorable return on transmission investments and consider giving itself a greater say in future projects.

The proposal met stiff opposition from utilities, and the state treasurer and a state-contracted financial adviser recommended against it.

Ultimately, that proposal never made it anywhere.
Energy Bill Squeaks By With No Renewable Portfolio Standard

The House Committee on Natural Resources and Energy worked for months on legislation that would create a renewable portfolio standard, requiring Vermont utilities to purchase and account for renewable energy.

That bill passed the House, twice -- first as House Bill 468, then as a strike-all to a bill dealing with smart meters.

In the last week of the session, renewable energy developers and House representatives who had spent many hours crafting the bill grew concerned the legislation would not make it out of the Senate.

In the end, the Legislature settled on a compromise that would expand the state’s Standard Offer program, which incentivizes in-state renewable projects through guaranteed favorable contracts.

Associated Industries of Vermont and other business groups criticized the renewable mandate. They say it will increase rates for customers without making a significant reduction in greenhouse gases.

Others say the renewable portfolio standard was the linchpin of the energy bill. Without it, utilities are able to sell renewable energy credits to states like Massachusetts and Connecticut. Under a regional accounting mechanism, this means power coming from a Vermont wind or solar project would be considered “brown” power, as if it came from a fossil fuel or nuclear plant.
Vermont Leads the Nation in Fracking Ban

If Gov. Peter Shumlin signs a bill banning the controversial practice of hydraulic fracturing for natural gas, as he is expected to, Vermont will be the first state in the nation to do so.

Environmental groups pushed the legislation, which is largely a symbolic measure, given the limited potential for natural gas extraction in the state, although geologist Laurence Becker said there could be deposits in the northwest part of the state.

As voted out of the House, the bill would have put a three-year moratorium in place. During that time, the state would have allowed the Vermont Agency of Natural Resources to update its regulations on underground injection wells and permit the federal Environmental Protection Agency to complete studies on the potential environmental effects of the practice, which was exempted from the Safe Drinking Water Act during the Bush administration.

The Senate took the more forceful approach of an outright ban.

Ultimately, the Legislature compromised — going with a ban but also requiring a study of the potential effects of the practice on groundwater.

Representatives for the American Petroleum Institute say the ban is unwise, given the jury is still out on the potential harms of fracking. They say the state is eliminating a potential economic resource that could help farmers earn extra income on their land.
Legislature Ditches Smart Meter Opt Out Fee

Vermonters who are concerned about radio frequencies or privacy issues won’t have to pay to opt out of programs by utilities to install “smart meters.”

The smart meters use small radio frequencies, like cell phones, to send data. That data allows utilities to monitor electric usage more closely and respond to outages sooner. Utilities say the meters will eventually help customers better manage their electricity use. For example, they could not run appliances at high demand times when electricity is the most expensive and comes from the dirtiest sources.

Green Mountain Power and CVPS planned to require a $10 fee for opting out of having a smart meter. That fee would have gone toward paying employees to read traditional analog meters manually.

Critics of smart meters say the technology could cause health problems and present possible privacy issues given the granular data they could eventually produce. More advanced meters can tell which appliances are in use at certain times in a home.


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