State Approves Financing For Natural Gas Pipeline

10/03/11 5:50PM By John Dillon
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AP/Toby Talbot
A natural gas supply line runs through St. Albans. The Public Service Board has approved a plan by Vermont Gas Systems to expand a line to Addison County that already runs from the Canadian border to Shelburne.

(Host) A proposed natural gas pipeline from Quebec to Addison County has moved a step closer to reality.

State utility regulators have allowed Vermont Gas Systems to set up a special fund that uses ratepayer revenue to pay for some of the pipeline work.

Vermont Gas says the decision means it can move ahead with plans to extend the pipeline south to Vergennes and Middlebury.

VPR's John Dillon has more:

(Dillon) Vermont Gas serves customers in Franklin and Chittenden counties with fuel that's now shipped from Canada.

The line ends in Shelburne. The Shumlin Administration has made it a top priority to extend natural gas service south -- eventually through Addison County to Rutland. Steve Wark is a spokesman for Vermont Gas. He says the Public Service Board decision on the project financing is a big step forward.

(Wark) "This is huge for Vermont. It has a potential to be a game-changer for Addison County and beyond. So we're really excited about it."

(Dillon) The board allowed Vermont Gas to use money that normally would be refunded back to ratepayers to help pay for the pipeline extension.

Instead of reducing customers' rates by five percent, Vermont Gas will deposit about $4.4 million a year into the special pipeline fund.

The board decision was not unanimous. PSB member John Burke wrote a strongly worded dissent. Burke said Vermont Gas is owned by GazMet of Montreal, which invested $138 million in 2009 to build out its distribution system. Burke said that shows the parent company has plenty of money to finance new projects.

But Wark, the company spokesman, said ratepayers will in the long run underwrite the cost of new construction. He says the fund approved by the Public Service Board will help lessen rate shocks in the future.

(Wark) "Ultimately this fund will help keep those rates smooth so that there's not the swings, and highs and lows, that would accompany a project like this."

(Dillon) Natural gas is cheaper than other fuel sources, such as propane or heating oil. But Matt Cota of the Vermont Fuel Dealers' Association says Vermont Gas enjoys an unfair competitive advantage.

(Cota) "If I'm a fuel company in Burlington and I want to expand to Middlebury, then I have to go out and get a loan to buy a new truck and hire new employees. If you're a utility, you can simply ask the Public Service Board to bankroll it. That's fundamentally unfair."

(Dillon) GazMet owns Green Mountain Power as well as Vermont Gas Systems. Cota says that Gazmet's recent decision to acquire the state's largest electric utility - Central Vermont Public Service - shows it has plenty of cash on hand to pay for the pipeline.

The Addison County project could cost between $50 and $70 million. The company says it will take about five years to go through the permitting and construction process.

The pipeline would be built underground, and would serve about 3-thousand customers, including residential and commercial users, in Vergennes and Middlebury. Vermont Gas says it's begun conversations with environmentalists about the pipeline review.

For VPR News, I'm John Dillon in Montpelier


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