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(HOST) Vermont’s electric utilities have requested rate increases. Commentator Timothy McQuiston takes a look at some possible long and short-term solutions to Vermont’s power generation problems.

(MCQUISTON) It may surprise you to hear that neither of the state’s largest electric utilities has raised rates in the last few years, and that their customers pay some of the lowest rates in New England.

To a large extent, that is due to relatively favorable contracts the utilities signed decades ago.

Two-thirds of Vermont’s electric energy is produced by the Vermont Yankee nuclear plant in Vernon and by the hydro-electric dams in northern Quebec. Most of the other third is generated by the natural gas plants in southern New England.

This puts Vermont in a pretty good position. While the power from Yankee and Hydro-Quebec isn’t cheap, it isn’t expensive, either, especially in contrast to the rest of New England. And those two sources have been pretty reliable.

While much of the rising cost of energy is due to globalization and geo-politics, the northeastern part of the U.S. has even higher costs, in part because of the use of high-cost fuels, which in turn are driving up home heating costs.

The northeast uses a lot of natural gas for electric generation. While coal is the cheapest and most abundant source of electricity in the U.S., only fourteen percent of electric generation in New England comes from coal.

Historically, nuclear was the heir-apparent to coal for electric generation. Natural gas was the heir-apparent to oil for home heating. But things don’t always go according to the proverbial plan.

Nuclear ran into environmental, safety and disposal concerns, as well as high construction costs. Natural gas became the darling of power generation as nuclear and coal became unwanted step-children.

As oil and natural gas prices have risen, coal and nuclear have become more popular. But don’t expect calls for a new coal plant in New England. Indeed, every energy option has a vocal opposition.

So, what’s the solution? Conservation helps take the edge off some of the cost and supply issues. But the electric companies believe they’ve gone about as far as they can in squeezing kilowatts out of the grid. Wind energy could help enhance our local energy portfolio, but wind is not a real baseload solution, nor does it solve the home heating and gas pump problems.

Solar energy will be the long-term electric solution, but it’s light-years away from implementation.

For the short-term, Vermont utilities should probably do what they really don’t want to do and put most of their eggs in just a couple of baskets. That is, extend contracts with Hydro-Quebec and Vermont Yankee – assuming that Yankee gets its license extension as expected.

In the near future, reliability will become more important than immediate cost concerns. And Vermont could be in a relatively enviable position with its predominantly non-fossil-fuel generation.

Timothy McQuiston is editor of Vermont Business Magazine.

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