The Public Service Board on Friday approved the merger of the state’s two largest electric utilities, Central Vermont Public Service and Green Mountain Power.
In approving the deal the three-member board approved a plan put forth by the utilities – and backed by the Shumlin administration – for repaying $21 million to ratepayers as a result of CVPS being bailed out by ratepayers in 2001.
The plan includes making investments that are expected to achieve savings for ratepayers rather than repaying ratepayers in cash directly.
The proposal for the $21 million the board approved Friday was the focus of an explosive debate in the Statehouse this year as many lawmakers wanted the utilities to pay the $21 million directly to ratepayers.
In reaching its decision about the $21 million, the board said requiring direct cash payment risked sinking the deal and scuttling the potential benefits of the merger.
They wrote in the decision that “any such a condition would put at risk the entire transaction, including the far greater benefits for ratepayers of both companies expected from the merger (both the $144 million of benefits that will be guaranteed by the Combined Company and the prospect of $500 million in ratepayer savings over 20 years).”
They also explained: “After reviewing all the evidence and Board precedent, we conclude that the CEED Fund as proposed in the DPS MOU represents an acceptable mechanism for providing the windfall-recovery amounts… notwithstanding that the CEED Fund investments are recoverable in rates — a fact that some may argue is not ideal.
“We reach this decision for two primary reasons. First, as articulated earlier in this Order, the merger of CVPS and GMP has tremendous benefits for ratepayers of both companies. These benefits cannot be achieved if any other entity were to purchase CVPS. The Petitioners have filed a comprehensive acquisition and merger proposal with us; a change to this aspect of the proposal such that the cost to Gaz Métro of acquiring CVPS were to materially increase could induce Gaz Métro to withdraw its offer and then Vermonters would lose all the benefits from the Proposed Transaction. Second, as explained more fully below, the CEED Fund is substantially similar to the GMP Efficiency Fund, which we previously determined was an acceptable mechanism for providing the windfall-recovery amounts set forth in Docket 6107. Thus, the proposal before us in the DPS MOU is consistent with Board precedent.”
AARP fought hard to have the $21 million sent directly to ratepayers, and the group was disappointed with the outcome.
“Today was a great day for Gaz Metro and CVPS shareholders and a lousy day for the ratepayers that bailed this CVPS out when it was in financial crisis,” said Greg Marchildon, AARP Vermont State Director, in a written statement.
Gov. Peter Shumlin, who took some political heat for backing the merger and reaching a memorandum of understanding with the utilities that the board approved Friday, said the ruling “affirms that the merger between Central Vermont Public Service and Green Mountain Power will bring tremendous benefits to ratepayers and is in the best interest of Vermont.”
“I continue to believe, and this ruling reflects, that the terms as approved by the Board will produce extraordinary benefits for consumers and the state,” Shumlin said in a prepared statement. “This merger will result in dramatic cost savings of $144 million over the next decade and $500 million over 20 years, improve efficiency and lower energy costs for more homes, and ensure that the public interest will be represented in the oversight of our state transmission system. This ruling is great news for Vermont ratepayers.”
More to come on this….