PROCTOR — A proposal by Green Mountain Power Corp. to ease rate shock on commercial customers in town was met with general approval Monday night at a Public Service Board workshop.

GMP offered to phase in commercial rates for existing Proctor customers over three years starting in September with a 27.2 percent reduction in their bills from current rates during the first year; 18.2 percent the second year; and 9 percent bill reduction during the final year before returning to current rates.

The proposal, which needs PSB approval, is designed to soften the blow caused by a dramatic hike in rates for the town’s commercial customers following the sale last year of the Vermont Marble Power Division by Omya Inc. to Central Vermont Public Service Corp.

CVPS has since merged with Green Mountain Power.

Because of the difference in rates, CVPS agreed to phase in rates for Proctor residential customers over four years. But commercial customers were hit with the rate hike at once, including a “demand” rate that the Vermont Marble Power Division didn’t charge.

To fund the phase-in of commercial rates, GMP will use an expected $270,000 surplus from a $1.1 million fund established by Omya Inc., as part of the phase-in to ease the impact on residential ratepayers, Scott Anderson, GMP’s manager of retail tariffs and contracts, told the two dozen attendees at the workshop meeting at Proctor Junior-Senior High School.

Anderson said the phase-in would be similar to the residential phase-in, giving commercial customers a series of fixed credits on their monthly bill that would offset base rates and then slowly increase over the three-year period when the rates catch back up to the full rates.

During the first year of the phase-in, Anderson said based on current customer analysis, “we project the first month’s fixed credit would effectively negate the demand charge entirely, would produce on average a 27 percent bill reduction for customers on an annual basis.”

Non-demand commercial customers will see a nearly identical rate phase-in over three years, with first year bills also reduced an average of 27 percent.

Anderson cautioned that all customers would be subject to any future rate increases GMP may seek throughout its service territory. (GMP is expected to shortly file an annual rate request under its alternative regulation plan.)

According to GMP, a customer who uses 1,800 kilowatt-hours a month for two or more consecutive months becomes a demand customer, paying a monthly service charge, a kwh charge and a demand charge. Residential accounts pay a service charge and a kwh charge.

The demand rate assessed to larger customers reflects the cost to have a certain amount of generating capacity in place and is also done to encourage energy efficiency. GMP points out that for customers with a demand charge, the kwh charge is lower than an energy-only rate.

The Proctor proposal, worked out with input from the town and commercial customers, also includes an education component.

“We will work with customers through education sessions, explain how to manage demands and do what we can to help those customers lower their bills,” Anderson said.

Alan George, a lawyer representing the town of Proctor, who helped negotiate the deal, said although a retroactive rate reduction wasn’t feasible, the proposal not only phases in rates but will help businesses learn about load management to avoid demand charges. George said that commercial customers will also have the advantage of going “a full year without any demand charges at all.”

He also pointed out that by 2015 the rates of CVPS and GMP, which have separate rates, will be homogenized to reflect the merged service territories.

When that happens, George said demand rates will likely be altered dramatically because GMP has a much higher kwh threshold before demand-billed rates kick in.

Among those in attendance Monday were June and Brent Wilson, owners of the Proctor Marble Company.

June Wilson told PSB member John Burke, who chaired the meeting, that she was caught off guard by the spike in her CVPS power bill last year. During one month, their bill more than doubled from $1,200 to $2,500.

Wilson said no one from CVPS notified them that the rate change would include a demand-charge – a charge that didn’t previously exist.

She asked how such a charge could have escaped the scrutiny of the PSB and the Public Service Department, the state’s consumer advocate in utility cases, when it was reviewing the CVPS purchase of the VMPD.

“I mean you look at these papers and a first grader could say they don’t have demand charges but these people do have demand charges,” Wilson said.

During the review of the CVPS purchase of the VMPD, the issue of commercial rates did come up and the answer the board received was that the impact wouldn’t be that dramatic.

Burke said the three-member board relied exclusively on that testimony, which is common. But Burke also said that if the board had researched the issue, the data existed that would have pointed out the difference in the commercial rate structure between VMPD and CVPS.

“It is true, if in fact, we had gone back … gone through rate design, that if we had done a forensic, we’d have found it,” Burke said. “But I’ve got to say in fairness, you still do generally rely on the testimony put in front of you. It doesn’t mean we didn’t have the raw material to find it.”

GMP spokesman Robert Dostis said that whatever outreach done prior to the CVPS purchase of VMPD, it “wasn’t done well enough.”

The rate shock forced Martin and Marsha Hemm, owners of the Vermont Marble Museum, to put the building and exhibit up for sale. The couple signed an option agreement last week to sell the museum to the Preservation Trust of Vermont for $880,000. The Trust in turns hopes to raise that amount and find a permanent nonprofit to own and run the museum

The Hemms did not attend Monday’s workshop.

The fact that the GMP’s proposal only applies to existing accounts could present a problem for a new museum owner. However, Burke said the rate problems that confronted the museum in the first place would not be lost on the PSB a second time around.

Two other business owners who attended the meeting were generally satisfied with GMP’s offer.

“During the summer months that first year my bill will go down $400, just in the demand part,” said Frank Beyette, who owns Franklin’s restaurant, and uses more power during the summer months.

Rachel Jackson of West Street Market said “any savings is a plus.”

But Jackson also said she has “a lot more cost of usage than demand usage.”

Monday’s workshop was an informal attempt to reach agreement as opposed to a formal rate hearing.

The proposal requires GMP to make a formal application to the PSB for approval.

bruce.edwards@ rutlandherald.com