GMP seeks to spread rate hike over two years
By Bruce Edwards
STAFF WRITER | August 02,2013
Green Mountain Power Corp. has come up with a plan to spread out rate increases over the next two years: 2.46 percent this year and no more than 2.5 percent the following year.
GMP said the two-year proposal uses $13 million in cost savings related to last year’s merger of GMP and Central Vermont Public Service Corp. to reduce $24 million in costs associated with GMP’s share of New England-wide investments in the transmission network.
GMP filed its two-year rate plan Thursday with the Public Service Board.
If approved by the PSB, the first year rate increase of 2.46 percent would take effect Oct. 1.
If the rate request, along with a proposed blending of GMP and CVPS legacy rates is approved, the monthly bill for an average legacy GMP residential customer using 600 kilowatt-hours would increase $3.61 a month from $99.22 to $102.83; for a legacy CVPS residential customer, their bill would increase $1.69 from $101.14 to $102.83.
For legacy customers of CVPS, the first year rate increase of 2.46 percent would be offset by the expiration last month of a one-year surcharge of 2.2 percent to cover Tropical Storm Irene-related repairs, according to GMP spokeswoman Dorothy Schnure.
A similar but smaller Irene-related surcharge for legacy GMP customers previously expired, Schnure said.
The second year rate increase beginning Oct. 1, 2015, would be capped at 2.5 percent and could be lower, Steve Terry, GMP vice president of development and external affairs, said Thursday.
Terry said GMP’s transmission costs, including some in-state Vermont Electric Power Company improvements for next year, together represent a cost of $24 million.
“This is a New England-wide transmission rate and Vermont pays its portion of it,” Terry said.
“Spreading the rate increase out over two years includes deferring $4.9 million in transmission costs to 2015,” he said.
Terry said the $13 million in merger savings will be applied to lower the rate impact on customers over the next two years. “With those two basic moving parts, we will be able to offer a two-year rate strategy that is quite different,” he said.
If all the costs were absorbed this year, the company said the rates would increase by at least 4 percent on Oct. 1.
The Department of Public Service and GMP have signed a Memorandum of Understanding on the two-year plan and filed it with the PSB.
Public Service Department Commissioner Christopher Recchia said “making the rates more stable and incorporating the regional transmission costs more gently was better for the consumer.”
Recchia said he expects the rate increase starting in 2015 will be lower than the maximum 2.5 percent proposed by GMP. He also said the two-year approach will give the state more time to work on the regional transmission issue and how costs are shared among the states.
Schnure said the two-year rate plan is especially helpful for businesses “to plan ahead (and) to have relatively low increases compared to other costs … .”
“Any time that there is rate stability that’s a good thing,” said Jamie Stewart, executive director of the Rutland Economic Development Corp. “We are seeing a trend in the New England states that power costs are going down, primarily because of natural gas-fired plants along the seaboard.”
He said Vermont needs to hold down its energy costs to remain competitive.
Jim Daily, president of Porter Hospital in Middlebury, said given the revenue cap imposed on the hospital by the Green Mountain Care Board, knowing future electric rates will be modest helps soften the impact.
“The fact that they’re for the next two years going to be in a comfortable zone for us was great news because hospitals are energy-intensive businesses,” Daily said.
GMP promised savings of $144 million in the first 10 years following the merger, including savings of at least $15.5 million in the first three years.
“We are demonstrating every day that operating as one company saves our customers money,” Mary Powell, GMP president and CEO, said in a statement. “In the face of significant increases in regional and local transmission costs, our diligent work to serve customers more effectively combined with our guaranteed merger savings of $13 million means that our rate plan is at least two percentage points lower than it would have been without the merger.”
GMP is in the final year of its alternative regulatory plan, which abbreviates the rate hearing process. The current plan also allows the utility every quarter to adjust up or down, depending on market conditions, the power cost increases or savings it can pass on to its 250,000 customers.
Only the 2.46 percent proposed rate hike that would take effect Oct. 1 comes under the alt reg plan.
Later this year, GMP will submit a new multi-year alt reg plan to the PSB. Also starting in January, GMP’s Terry said, the state will begin a top to bottom review of all its rates.
In a related development, GMP said it will file a plan this month with the PSB to merge the legacy residential electric rates of GMP and CVPS into one rate.
Because of the complexity, the blending of commercial and industrial rates will take additional time.