The $21 million windfall provision in the proposed merger of Central Vermont Public Service and Green Mountain Power has become the odd and unlikely political thriller of 2012.
And while the climax is coming soon – legislative leadership aims to have members out the door before May – no one seems to know yet how this drama will end.
The back story by now is familiar to most everyone: pushed to the brink of insolvency by an ill-fated power deal with HydroQuebec, CVPS in 2001 asked the Public Service Board to stave off bankruptcy by forcing customers to pay above-market costs for electricity.
The three-person board granted the request, under one condition: if CVPS ever became financially healthy enough to attract a takeover bid, the utility would have to somehow compensate ratepayers for keeping the company afloat.
The board left open the question of precisely how that compensation should be administered, a vagueness largely responsible for decibel level of the debate 11 years later.
The controversy in Montpelier bubbled up slowly at first, springing from a disagreement over how the $21 million windfall ought to be returned to ratepayers. Utilities proposed allocating it to a seed fund for efficiency programs; lawmakers, emboldened in part by a well-funded campaign by AARP of Vermont, wanted $76 checks sent directly to CVPS ratepayers.
Things started getting crazy on March 27, when the Department of Public Service unveiled a Memorandum of Understanding between the state and GMP and CVPS.
Only then did lawmakers find out that not only would the $21 million be used for weatherization programs, but that the ratepayers themselves would be billed back, in the form of higher rates, for any money deposited by the utilities into the efficiency fund.
Shock and outrage ensued.
The debate has tugged at the populist heartstrings of lawmakers from across the political spectrum, more than 70 of whom in the House have signed their names to an amendment that would, as a condition of any merger approval, require the Public Service Board to force utilities to send checks back to ratepayers, and prevent them from recapturing the $21 million in rate base.
The Senate too has joined the battle. Led by Senate President John Campbell, lawmakers downstairs have amped up the rhetoric against a proposal that has been described in turns as “dishonest,” “unjust” and “unfair.”
So many words, but what do they all mean?
Nothing, so far.
Lawmakers had initially hoped escalating political pressure would compel the governor to reopen the MOU. But that’s not going to happen.
At a press conference Wednesday, Peter Shumlin issued a full-throated defense of his administration’s deal with the power companies.
“My own judgment is that my department negotiated the toughest deal we could get for ratepayers in this merger that’s going to bring real value to customers,” he said.
Asked twice whether it was shareholders, and not ratepayers, who ought to be funding the $21 million windfall provision, Shumlin deflected the inquiry, saying reporters are asking the wrong question.
“I think you’re missing the question – I really feel this strongly,” he said. “The question to me is, how do you take the merger of a utility and get the best possible deal for ratepayers that you can?”
Two key components of the MOU, Shumlin said, offer proof that Commissioner of Public Service Elizabeth Miller “drove (the utilities) as far down the pike as we can get them.”
The rate at which the $144 million in merger-related savings will accrue to utility customers, Shumlin said, has been increased dramatically as a result of government intervention.
VELCO governance, too – at one point the most controversial aspect of this merger deal – has also been largely resolved in an MOU in which Gaz Metro agrees to cede power over the transmission company to a independently governed public-benefits corporation.
As for the thornier issue of where the $21 million comes from?
Shumlin said that when Gaz Metro acquired GMP in 2007 – an acquisition that also involved a ratepayer windfall related to a bad HydroQuebec deal – the Public Service Board approved a plan almost identical to the one outlined in the latest MOU.
Back then, GMP created an $8 million efficiency fund, but collected that investment from customers in the form of higher rates. The savings that accrued to customers as a result of those ratepayer-funded investments, the board ruled in 2007, satisfied the windfall requirements.
“This particular piece happened to be exactly what the Public Service Board ordered the last time we had an identical deal,” Shumlin said. “It seemed logical it would be dealt with in the exact same way.”
With the governor unbowed by political pressure, lawmakers are contemplating their next move.
Rep. Patti Komline, a Dorset Republican, helped author the amendment that looks to intervene in the open PSB docket. But she needs a vehicle to which to attach it, and House leadership is blocking, for now, the only two bills to which the amendment would be germane.
In the Senate, meanwhile, lawmakers are eying the miscellaneous tax bill as a vehicle for some version of a windfall amendment.
But much as he dislikes the utilities’ windfall proposal, Campbell has said he strongly opposes legislative intervention in the quasi-judicial Public Service Board process. So barring a coup, any windfall-related riders on the tax bill won’t go as far as the most ardent opponents would like.
Last week, word spread in the House of a compromise measure that involved a nonbinding resolution. A resolution would offer opponents a chance to register their disdain in a roll call vote, while allowing House and Senate leaders to avoid interfering in the PSB deliberations.
But negotiations in the House are by most accounts nonexistent at this point, with opposing sides communicating mainly through the press.
Under no circumstance will the Legislature will depart the 2012 session with a law dictating to the Public Service Board the terms of the merger.
While Komline has 72 sponsors on her amendment, that doesn’t mean she’s got the votes to win on the House floor. House Speaker Shap Smith hasn’t discouraged members of his caucus from signing on to the amendment – he in fact has reportedly given his blessing to constituents for whom the issue could otherwise become a political liability come election time.
Should Smith feel compelled to undermine Komline’s sponsor list, Democratic support for the amendment would peel off dramatically.
And if the sun rose in the west and the House passed a law interfering in an open Public Service Board docket, then Shumlin would veto the measure forthwith.
So what IS next?
A procedural maneuver in the House could see a floor vote on whether to unblock one of the pieces of legislation to which Komline’s amendment would be germane (they include a DPS housekeeping bill and a smart meter bill). That vote would almost certainly fail, but would be viewed as a stand-in for a vote on her windfall amendment.
Either late this week or sometime next, the Senate will telegraph its plans for action. Until then, the merger issue will likely continue to command an inordinate share of media attention.
As Shumlin said at the close of his press conference Wednesday:
“I’m glad we had this $21 million, because it’s distracting you guys from the real issues of the day, and we’re getting a lot passed here while you’re focused on it.”