Pipeline Service Department

By Rebecca Foster

In case you were wondering this far ahead what to give me for Christmas, I want An Answer: What does the Vermont Public Service Department do?

A year and a half ago, when all this pipeline business got started, the Public Service Board (PSB) assured the public that its interests would be carefully looked after by the Department, whose mission is to “serve all citizens of Vermont” and “meet the public’s need for least cost, environmentally sound,…sustainable, and safe energy…and regulated utility systems in the state.” Oh, and there’s “strong consumer protection advocacy” in there, too. What great good luck for us! A government body that will go to the mat for all Vermonters and “lead the nation” in Energy efficiency! Renewable energy! Utility regulation! (Says the Department’s online vision circle.)

Optimistically, Monkton residents walked into a meeting with Department reps to discuss the gas transmission pipeline proposed to cut through their town. A Vermont Gas Systems (VGS) right-of-way agent had warned two elderly brothers against talking to their neighbors about the pipeline. But since they had not signed a gag order, the ROW agent was—ahem—overstating, and intimidating the brothers into silence. A widow was told by her VGS agent that she was required to counter VGS’s offer even though she didn’t want to, and the agent suggested the precise amount he thought would do the trick. Is that even legal? A Monkton official admitted there were a lot of people in town that might sign documents against their will when so intimidated.

So the Monkton residents had high hopes when they went to the meeting this March, but “we walked out of there shocked to realize that nobody would be looking out for us,” said Maren Vasatka. “It was deceptive to pose as if they were going to help us.” The Department’s counsel told Vasatka that its primary obligation was to protect ratepayers, so it could not take any action that might lead to landowners’ receiving higher (read: fair) compensation.

To this day, VGS is proposing easements that Vasatka believes would be dangerous for landowners to sign. They are still written to protect and benefit VGS, solely. The provisions are so broad that the pipeline could change size or transport any kind of “gaseous” material, additional pipes could be laid, and VGS would have the right to sell the easement at any time to anyone. In perpetuity. Vasatka made what seems a small, straightforward addition to her easement: Should her property insurance ever require a pipeline rider, VGS will pay for it. VGS’s response: No way, but if you need to sue us in the future, be our guest.

I want to be clear about what these easements represent: A permanent profit corridor for VGS on which the landowner continues to pay taxes, is restricted in the use of the land, and is at risk of explosions for generations. Over-reaction? This country has experienced some 8,000 significant (i.e., someone hospitalized or killed or damages of over $50,000) gas and oil pipeline ruptures from 1986 to 2013 totaling $7 billion in damages. (U.S. Department of Transportation Pipeline & Hazardous Materials Safety Administration.)

Given that the Department prides itself on serving “all citizens of Vermont” as a utility regulator, it’s hard to understand why it would refuse to help landowners come to a fair agreement with the utility it is supposed to be regulating. But let’s do a thought experiment and pretend that it’s not possible to look after the interests of both landowners and ratepayers, and that the Department is busy safeguarding the ratepayers, because at least that would be something…

The “ratepayers,” by the way, are the 45,000 VGS customers in Chittenden and Franklin counties who are already being gouged to the tune of $4.4 M annually for 20 years to pay for this very pipeline expansion.

Guess who decided to take that money from ratepayers?

The first sentence of the 2011 order from the PSB authorizing the swindle is, “Vermont Gas Systems, supported by the Vermont Department of Public Service, has proposed the establishment of the System Expansion and Reliability Fund for VGS.” Board member John Burke dissented from this decision on the basis that VGS’s parent company, Gaz Metro, had an embarrassing amount of cash it could use as “venture capital” for new fossil fuel infrastructure without taking it from the ratepayers. The Department proved itself a ratepayer advocate after all—it advocated that ratepayers pay instead of the multi-billion-dollar Gaz Metro.

The Department worked out the ratepayer plan with VGS and signed a memorandum of understanding with VGS long before the PSB had technical hearings, deliberated, and ruled on the case. Most ratepayers don’t realize that a portion of their bill is earmarked for building a pipeline from Colchester to Middlebury (Phase 1.) When VGS announced in July that the cost of Phase 1 was going up by 40% to $121 M, ratepayers started to pay attention. (Word came out this week that the cost of Phase 2 has gone up as well, 50.1% from $49.3 M to $74 M.)

It’s worth looking at the details of the budget. Although Phase 1 as a whole went up by 40%, not every aspect of it went up evenly. Some went up more: Engineering and oversight went up 65%; “other expenses” went up 325%. All of that extra money goes to VGS and VGS partners and subcontractors. By contrast, landowner easements went up at a lower rate, 25%.

It’s fishy that VGS knew about the increases in March this year, but waited until just after they had received all of their construction permits to announce the necessary rate hike of 3.8% just to cover the increase. It’s a tried and true method: Get them hooked, and only after give them the bad news, kind of like herpes. This is the “bait-and-switch” that had Vermonters so outraged that they took their complaint directly to the Department and the PSB at a “fish-in” on July 21.

“This is unprecedented in Vermont,” reads the response to the cost increase filing by intervenors Kristin Lyons and Nathan and Jane Palmer. “Franklin and Chittenden County ratepayers will be paying for the Addison upgrade for so long that the analysis in the Board’s order no longer supports, or fits, the facts of the case.” The motion asks the PSB to open an investigation, and potentially re-open the permitting of the Certificate of Public Good (CPG).

To qualify for the CPG (and to continue to qualify for it,) the project must represent the least cost option over, say, energy conservation and efficiency, says the Conservation Law Foundation. The Department, don’t forget, is supposed to be keeping a keen eye out for “least cost” energy for Vermonters. When the cost of hooking up 3,000 new gas customers rose with this price increase to over $40,000 each, that made buttoning up, which can reduce energy consumption by 50%, look mighty good at an average cost of $7,500. For $121 M we could weatherize over 16,000 homes.

Michael Hurlburt called the Phase 1 price increase “offensive” in his comments to the PSB. “As farmers, who work hard for our income and don’t have the luxury of other people paying for us to make a profit…we simply cannot understand the attitude inherent in VGS’ filing. In the current economy, every Vermonter, including ratepayers and landowners are watching every penny and living on tight budgets.” Except Gaz Metro, he adds.

But just because the Department was in cahoots with VGS against the ratepayers on the Expansion Fund plan doesn’t mean it wouldn’t leap to protect them against this enormous increase in the cost of the project, right? Well, the hero of this column, the Department, evidently did not take offense at the price increase, and nor does it want the increase to be analyzed too closely. “It would be counter-productive,” the Department writes in its response to the PSB, “to halt the project, thereby driving up costs, in order to conduct a proceeding that would almost certainly result in renewed findings that the project meets the section 248 criteria”. If it is so certain—or, er, almost certain—let’s re-open the case and verify, because many people who are scrutinizing the numbers are coming to the conclusion that this project is pathologically throwing good money after bad. And if that is the case, the cost of taking the time to get the decision right would be repaid millions of times over.

Caught between growing public discontent and caving on its “strong consumer protection advocacy” role by refusing to examine the financial details on behalf of ratepayers, the Department had to devise a punishment. It focused exclusively on the administrative flaw of delayed reporting and “request[ed] that the Board issue an order directing VGS to pay a civil penalty of $35,000.” VGS had been prepped by the Department (“The Department has notified VGS of its intent”.) Upon the Department’s filing, immediately and eagerly VGS lawyers told the PSB that “VGS has decided to pay the amount of $35,000 proposed by the Department.” Apparently the proposal was too good to pass up and VGS did not want to wait for a legitimate order from the Board that might actually be meaningful.

The Department admits that it knew about the increased costs in March. It says it “urged VGS” to file the new information with the PSB. Yes, friends, leading the nation in utility regulation, it took four months for that utility to comply with the Department’s urging.

For failure to report what it knew, the Department should also be fined $35,000. And then it should be taken to task for subverting its own mission and disillusioning the public.