GMP uses merger savings to cut electric rates
The just-completed merger of the state’s two largest electric utilities already is paying dividends with the first rate reduction in 24 years.
Green Mountain Power Corp. on Wednesday asked the Vermont Public Service Board to lower rates for its 250,000 customers by 0.4 percent beginning Oct. 1.
Based on 600 kilowatt-hours a month, a former CVPS residential customer would see his or her bill drop 41 cents to $101.55; a GMP customer would see a decline of 40 cents to $99.22 a month.
GMP said it would be the company’s first rate reduction since 1988.
The proposed rate decrease follows the merger in June of GMP and Central Vermont Public Service Corp.
Prior to the merger approval, GMP officials had repeatedly promised regulators and the public that customers would reap $144 million in savings over the first 10 years with additional savings in the decade after that.
GMP said that the first-year merger savings of $2.5 million made the rate decrease possible. In addition, the company said it found additional “efficiencies and savings to help keep rates lower.”
“We definitely had committed as quick as possible, so the fact that we were able to harness some savings was good news but news that I expected to deliver,” GMP President and CEO Mary Powell said in a phone interview. “The thing I was more pleasantly surprised with was our ability with a continued laser focus on costs, to continue to drive down other costs and alleviate all the pressures on rates.”
Powell said some of the merger savings came from eliminating redundancies, including the elimination of certain officer positions at CVPS. (GMP pledged no other layoffs and that any workforce attrition in the future would be balanced between GMP and the former CVPS.)
Powell said on average utility costs have risen 3 percent to 5 percent a year for the last 10 years.
“So the fact that we were not only able to counteract all those pressures on rates,” Powell said, “but also through the merger savings get to the point where we could deliver a decrease, I was really pleased.”
Gov. Peter Shumlin said in a statement that the rate decrease is what led him to support the merger.
“This is a promising start for the new company, as it works over the coming years to deliver on its merger promises,” Shumlin said. “I have said for months that this merger will save money for Vermont families and help our businesses create jobs, and this great news is further evidence of that fact.”
Sen. Kevin Mullin, R-Rutland, was a critic of the merger and in particular its potential adverse economic impact on Rutland, the former headquarters of CVPS.
Mullin said Wednesday that he was expecting a small rate increase, so the rate reduction is a promising start for GMP.
“I think Green Mountain Power is trying to do everything they can to be good corporate citizens,” Mullin said, “and I just hope they follow through on all the promises that have been made.”
The Department of Public Service, the consumer advocate in utility cases, will review GMP’s filing before giving the plan its blessing. But if approved, the rate reduction will also benefit consumers in the future.
“It also sets a base from which future merger savings will be measured over the next decade, and shows us that the company is willing to work hard to hold the line on costs in order to deliver the benefits promised to customers in the merger,” Commissioner Elizabeth Miller said in an email.
The rate reduction is welcome news to manufacturers, traditionally large power users.
The central Vermont area has a number of large manufacturers: Green Mountain Coffee Roasters, Ben & Jerry’s, SBE Inc., and Northern Power Systems.
“It will be good news in this day and age when usually … (one) doesn’t hear of decreases, we hear of increases,” said Susan Anderson, executive director of the Central Vermont Economic Development Corp.
GMP said its focus on clean, cost-effective energy sources and long-term contracts are designed to help keep rates stable.
Although Powell would like nothing better than to serve up rate reductions on a regular basis, she said, the reality is quite different, whether it’s health care costs or property taxes.
“There’s a lot of other pressures driving rates up, which is one of the reasons why we’ve always said this merger is so darn important,” Powell said, “because Vermonters don’t have that many opportunities to harness $144 million of savings in sort of core infrastructures that serve our basic needs.”
GMP’s rate reduction request represents its annual base rate filing made each August under the company’s alternative regulation plan — an expedited hearing process before the PSB. In addition, GMP files a quarterly power cost adjuster.
If approved by the PSB, the rate reduction will apply to residential, commercial and industrial customers.
Merger negotiations with the Department of Public Service and approved by the Public Service Board on June 15 ensured upfront savings of at least $15.5 million in the first three years after the merger.
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