Douglas defends electricity discount for IBM

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(Host) Governor Jim Douglas is defending a special power deal with IBM. Under an agreement between the state and Green Mountain Power, IBM would get a discount on its rates while residential customers would see a slight rate increase.

VPR’s John Dillon reports:

(Dillon) IBM has negotiated two special economic development agreements for lower electric rates. The third agreement is now under review at the Public Service Board.

IBM buys about $35 million of electricity a year from Green Mountain Power. An IBM spokesman says the agreement will cut its bill by about 1.5%, or about $525,000. GMP spokeswoman Dorothy Schnure says the deal is designed to help IBM. The company has cut 2,300 jobs in Vermont since 2001.

(Schnure) “The point of this is to help IBM improve its competitive posture at its Vermont manufacturing facilities. We believe and IBM believes that ultimately that will benefit the state’s economy and all of Green Mountain Power’s customers.”

(Dillon) Electricity rates are set by the Public Service Board. In the past, the board has opposed rate deals that would force residential customers to subsidize the rates paid by large industrial users.

GMP says it needs to raise rates 1.9% in January 2005. It would be the first rate increase in three years. In testimony before the Public Service Board, a GMP official said that the rate increase will allow the company to offer IBM the special deal on its power bills. But Schnure says residential customers aren’t subsidizing IBM.

(Schnure) “It’s a mistake to presume that this increase is for IBM. As I said there are many other factors driving it. We need the financial confidence and stability that the rate increase gives us to be able to offer this agreement to IBM.”

(Dillon) Economic development rates are often granted when companies expand and hire new workers. IBM has cut jobs in Vermont. But Governor Jim Douglas says the economic development agreement with IBM makes sense. The governor says GMP’s residential customers would pay much higher rates if IBM left.

(Douglas) “It’s important that IBM be successful, that other manufacturing concerns succeed, not only to assume its share of the electric rate costs, but also to maintain the strength of our economy, to create jobs here and to increase the employment opportunities. So it’s important to address the competitive disadvantages whether it’s taxes, permitting, power, health care costs. This is one we can make progress on. I think this is a good deal for Vermont.”

(Dillon) IBM says the agreement will still allow GMP to cover the cost of power. The Public Service Board has scheduled additional hearings on the GMP agreement next week.

For Vermont Public Radio, I’m John Dillon.

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