Vt may look at cutting power regulation
By Peter Hirschfeld
Vermont Press Bureau | November 13,2013
MONTPELIER — The chairman of the House’s top energy committee says it might be time to bring competition back to Vermont’s electricity market.
Rep. Tony Klein, an East Montpelier Democrat, said Tuesday he’ll entertain a proposal to partly deregulate the state’s utility market and allow Vermont’s largest consumers of electricity to negotiate power contracts with sellers outside their designated service territories.
The proposal comes as manufacturing giants like Omya in Proctor and Weidmann Electrical Technology in St. Johnsbury decry a cost of power they blame in part on lack of competition.
“I want to talk about creating a program, a model program, where some of the larger industries can benefit from a deregulated power market for some of their power needs,” Klein said. “It would be a big deal, but it’s something to think about, because the world is changing.”
Klein unveiled his proposal Tuesday at the Capitol Plaza Hotel and Conference Center in Montpelier, where members of the Associated Industries of Vermont gathered for an annual conference titled “Change and Uncertainty in Vermont’s Energy Future: Challenge and Response in Energy Competitiveness.”
Klein said he isn’t yet convinced that the introduction of competitive bidding to the power purchase landscape will yield the savings that corporate executives envision.
“But things are changing quickly in the world of energy, and it’s something that we need to consider,” Klein said.
Chris Recchia, commissioner of the Department of Public Service, said Klein’s proposal “is worth talking about.”
Recchia, however, said Vermont should be careful about reforms to a system that has resulted in some of the lowest electricity rates in New England.
He said Vermont’s brand of regulation has also lent stability to a product that has seen price spikes elsewhere.
“There is a value to consumers in mitigating that risk and providing stability,” Recchia said.
John Goodrich, vice president of manufacturing at Weidmann Electrical Technology, said comparing power prices here with other states in New England paints a rosier picture than the reality faced by manufacturers, because prices in the region are so much higher than anywhere else in the nation.
Goodrich said industrial consumers of electricity in Vermont pay the sixth-highest rates in the lower 48 states. And he laid a portion of the blame on a system that “doesn’t allow for consumer choice in electricity.”
“Legislative actions mandate the purchase of renewable power, so that those costs are rolled into our rates no matter what we do,” Goodrich said. “I think an extraordinary emphasis on renewables is playing into (electricity rates), and I think lack of competition also plays into high costs in Vermont.”
Klein, Recchia and Mary Powell, CEO of Green Mountain Power, said the looming decentralization of the nation’s power system will make renewable generation a keystone of any successful long-term electricity strategy. Solar, wind and hydro will in fact have a stabilizing effect on rates in Vermont, they said.
Powell also said experiments in competition elsewhere haven’t generated the lower prices proponents had forecast.
Vermont utilities pushed for deregulation back in the mid-1990s but were ultimately rebuffed by lawmakers, likely to the benefit of ratepayers, Powell said.
“What we do know is that unlike what we thought, back when we were arguing for it … is (competition) is part of what drove high peak and high volatility,” Powell told the audience made up mostly of businessmen and lobbyists. “Competition ... has not proven to deliver the promise on rates that it was expected to deliver.”
Recchia and Klein said businesses assume enormous risk if they do opt to enter the power purchase market on their own and that the commodity market for electricity is complex and fraught.
“What you buy into this year as looking like a very good deal might turn into one that isn’t,” Recchia said. “And there’s a lot of risk management that goes into power purchase agreements that maybe some industries would not have the capacity to do.”
Recchia also said electricity rates represent not only the cost of power but the cost to deliver that power over an expensive transmission infrastructure.
If large consumers of power are allowed to purchase from somewhere other than their designated utility, Recchia said, then the state needs to make sure ratepayers in that territory aren’t forced to underwrite the costs of transmission for the commercial clients.
Bill Driscoll, vice president of Associated Industries of Vermont, said that while the state needs to investigate risk before instituting any changes, it’s a conversation worth having.
“It’s what all the states around us do, and it’s what a lot of states in the country do,” Driscoll said. “We’ve got a serious problem with electricity costs in this state, and this idea is worth a serious and sober assessment to see if it can be done in a way that will help out.”
Klein said his Committee on Energy and Natural Resources will consider a proposal when the Legislature reconvenes in January.