On both sides of the controversial Vermont Gas pipeline, advocates are framing a coming decision from Vermont's Public Service Board as the answer to some major questions facing the state: Will Vermonters invest millions of dollars ensuring continued reliance on fossil fuels for decades to come? Will residents outside Chittenden and Franklin counties get the benefits of natural gas – a cheaper, cleaner-burning alternative to the home heating oil used in much of Vermont?
In reality, those questions have already been answered; the board approved a version of the project in 2013.
The new question: Did Vermont Gas’ mismanagement of cost projections put the project so far off track that it can’t be saved?
The company will either be allowed to complete the $154 million pipeline, extending service from Chittenden County south to Middlebury, or regulators will decide that the 2013 permit for the project – issued when the cost was estimated at $86.6 million – doesn’t apply anymore after estimated costs went up nearly 80 percent last year.
The latest uncertainty surrounding the project’s future is the result of botched cost estimates by Vermont Gas and, more recently, an agreement drawn up in an ill-fated attempt to speed up the regulatory process.
New documents show the company is worried the board’s hesitation has threatened the fate of the entire pipeline. The documents also show the company fought against language in the agreement that held the company accountable for the bad cost estimates.
See an annotated walkthrough of the correspondence between Vermont Gas and Department of Public Service officials.
Protecting Customers
The cost of a utility project matters to regulators because ultimately utility customers fund the new construction through rates. The Public Service Board exists to protect Vermonters from big utility bills caused by runaway spending by utilities.
The Department of Public Service exists to represent Vermonters in Public Service Board proceedings. The state law governing the department says it should give special consideration to “the interests of ratepayer classes who are not independently represented parties in proceedings before the Board.”
So when the department announced an agreement with Vermont Gas in October, critics cried foul. How is the department representing Vermonters’ interests, they asked, if department officials are holding private negotiations with Vermont Gas executives?
Documents made public through the Public Service Board process provide a rare view into those negotiations. They show that department officials pushed the company to be more transparent about the project’s turmoil and to accept the possibility of an investigation into its mishandling of cost estimates.
In one exchange typical of the negotiation process that took place over four days and 26 emails, Vermont Gas Vice President Eileen Simollardes sent a draft of the agreement to the Department of Public Service with notes in the margin.
“Streamlined and stated in the positive rather than negative,” one note says, explaining the company’s edits. “DJR [Vermont Gas CEO Don Rendall] very concerned about tone the way it was written last night.”
This is the paragraph Rendall was concerned about:
Vermont Gas believes that if the Addison Project cannot be completed in 2016, the estimated costs would increase beyond the $154M current estimate. Vermont Gas further believes that, in order to complete the Addison Project in 2016 and consistent with the Cost Update, the Remand Proceeding must be concluded preferably by affirming the existing CPG, but in any case by January 8, 2016 or seriously risk the Project’s completion. Further Vermont Gas must have construction access to all rights-of-way required for the Addison Project by June 1, 2016 to complete the Project in 2016.
Negotiations for this paragraph resulted in far less information getting through, though the department worked to preserve wording that made the project’s uncertainty clear. The Department of Public Service, in its final edit, cut out a Vermont Gas suggestion that qualified the risks presented by delays. This is the final version:
The final version doesn’t say anything about the project’s completion timeline, nor does say the fate of the project depends on meeting deadlines on Jan. 8 and Jun. 1, 2016.
The early draft shows why the company and the department chose to design the agreement to become void if the Public Service Board hasn’t upheld the permit by Jan. 8: That's because the project timeline and budget will no longer be viable if the company isn’t sure about the permit by that date.
As DPS Commissioner Chris Recchia said after the agreement was announced – and as Vermont Gas spokeswoman Beth Parent has declined to confirm – Vermont Gas may have to cancel the project if the board doesn't rule by the end of the first week in January. The draft agreements make it clear that the company was aware of that risk even as they publicly refused to acknowledge it.
Board Investigation
In an interview about the negotiations, Parent said the Vermont Gas executives working on the agreement had three goals:
“Making sure that this agreement held us accountable for challenges that this project has faced in the past, acknowledge the great work we’ve done this year getting it back on track and provide value to our customers. And that’s exactly what this agreement does.”
That claim isn’t totally supported by the company’s drafts of the agreements, though. Perhaps the strongest accountability provision in the agreement was language that Vermont Gas executives repeatedly tried to strip from the agreement.
In the final agreement, the provision looks like this:
Vermont Gas agrees to not oppose and to fully cooperate in any separate Board investigation regarding cost estimates and/or the timeliness of any cost estimate disclosures pursuant to 30 V.S.A. § 209, and to the extent appropriate, 30 V.S.A. § 30.
The sentence says that Vermont Gas won’t fight an investigation that the Public Service Board already has the authority to conduct. But Vermont Gas repeatedly tried to edit the statement out of the agreement.
When asked how those attempts are consistent with accountability, Parent dodged.
"I don't have all of the emails in front of me, but what our team was laser-focused on is making sure that the company, and not our customers, bear the risk for any project costs over $134 million,” she said.
The Decision
Vermont Gas hasn’t said what might happen if the Public Service Board doesn’t make a decision about the pipeline permit by Jan. 8.
“We will be looking at what the best thing to do is as we review where we are on Jan. 8,” company CEO Don Rendall said at a November news conference. “I hope and look forward to having a decision by Jan. 8 and working based on that decision. If we don’t have a decision, we’ll cross that bridge when we come to it.”
Asked outright if the company might cancel 2016 construction on the pipeline if the board misses the deadline, Rendall said the deadline exists so the company can be ready to build next season.
“Really that Jan. 8 [deadline] is there so we can do the incredible amount of planning and management around having the resources available, having the resources ready to hit the ground, and being ready to go during the normal construction season which will be in April,” he said.
Rendall’s characterization of the deadline assumes the board decision will uphold the project’s permit, but the board can also amend the existing permit by requiring the company to make additional filings or abide by new conditions. The board could also revoke its permit and require the company to start over with a new application.
With the Jan. 8 deadline looming, any board ruling that doesn’t allow the company to work uninhibited on the pipeline for the entire 2016 construction season could prove fatal to Vermont’s largest utility project in a decade.
See an annotated walkthrough of the correspondence between Vermont Gas and Department of Public Service officials.
