(Host) Commentator Tim McQuiston says that current negotiations over electric utility rates in Vermont are beginning to resemble a transaction in a Mexican marketplace.
(McQuiston) If you’ve ever been to Nogales, Mexico, you know what I’m talking about. It’s just across the border from the Arizona town of the same name. Over the border you find many shops selling a variety of consumer products. You can dicker for rugs, clothing, footwear and more.
In a similar way, Vermont electric utilities negotiate rate increases with the Department of Public Service, with the Public Service Board making the final decision.
A utility will submit a rate increase request to the Board. The Department, in its role as public advocate, will offer its opinion on how large a rate increase, if any, the utility should receive.
In most cases, the utility and the department start very far apart and eventually meet somewhere in the middle, just as might happen in buying a sombrero in Nogales.
Unlike the shopkeeper, who must compete with the fellow right next door, the Vermont utilities are regulated monopolies. They are allowed but not guaranteed a maximum profit. The reason that regulators want the utilities to be profitable is to make the utility a good investment for its shareholders, which in turn makes for a stronger, more reliable company.
In the meantime, the utilities go about the business of selling electricity to consumers, and if they want to raise rates, they have to go to the Public Service Board. In a case currently before the Board, CVPS wants a rate increase of just over 5 percent. But in a move that would make a Nogales sombrero dealer’s jaw drop, Governor Jim Douglas, during a gubernatorial debate with Peter Clavelle, no less, said that his administration (that is, the Department of Public Service) will make the case that CVPS should cut its rates about 6 percent.
ARRIBA! Now, that’s dickering.
The state’s position is that the savings rendered from the sale by the Vermont utilities of the Yankee Nuclear Power Plant in Vernon will save CVPS a lot of money, and that ratepayers should reap some of that windfall. Douglas said not only that the state wants a cut in rates, but that ratepayers should also receive a refund going back to last March. Total savings to Vermont consumers, according to the Department of Public Service, would be in the order of $30 million .
So far, CVPS has played it pretty cool. It believes it has a strong case and will continue to push for a rate increase before the Public Service Board. Whether you’re negotiating a 30 million dollar electric rate case or a 60 peso hat, you don’t give in until the other guy starts to walk out the door.
This is Timothy McQuiston.
Timothy McQuiston is editor of Vermont Business Magazine.