State considers purchase of hydro power dams

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(Host) Experts hired by the state to study the purchase of a series of power dams on the Connecticut River say there’s a slim chance that Vermont could pull the deal off.

But the consultants also say that if the state could put all the pieces together in the complicated financial transaction, Vermont could save money on electricity in the long term.

VPR’s John Dillon reports.

(Dillon) A state panel is taking a close look at the financial risks and rewards of buying a series of power dams on the Connecticut River.

The owner of the dams, PG&E National Energy Group, is in bankruptcy. And there’s a major question whether the Connecticut River assets will be sold separately and whether Vermont could put together a competitive bid.

On Thursday, the panel also learned that the potential deal is complicated by tax issues, the size of the state’s debt and the future power market.

The six dams produce about 500 megawatts at maximum output. But the state doesn’t need that much power right now – the real shortfall comes in about 10 years when Vermont Yankee goes off line and contracts with Hydro Quebec start to expire.

But in order for Vermont to take advantage of one kind of low low-interest financing, the long-term power would have to be sold to municipal utilities.

But consultant James Coyne said most of those potential buyers are out-of-state.

(Coyne) I think that this is the break-through point in the analysis – is that there isn’t enough load in the state of Vermont today or for the foreseeable future to warrant the size of the resource. So most of the benefit is going to be flowing out of state.

(Dillon) Another factor that complicates the deal is a volume cap on tax-exempt bonds that is set by the federal government. The volume cap is now at $228 million and it’s already used by bonds that support student loans, industrial development, and other programs.

Coyne said there was a way that the state could use tax exempt bonds to buy the dams and re-sell the power in Vermont to private utilities. But that means some other program would be squeezed out of the volume cap.

(Coyne) How do you get benefits to a broad group, or potentially all Vermont ratepayers, and it’s an excellent question. You cannot do that using tax exempt financing unless the state were to use volume cap. And we’ve looked at the volume cap issue. If the state were to make the political choice between these other agencies and the hydro project, you could get there using volume cap.

(Dillon) Although the financial and political barriers are large, an advocate of buying the dams said he remains optimistic. Essex-Oreleans Senator Vince Illuzzi said private companies want to team up with Vermont and share some of the risk.

(Illuzzi) Vermont has a number of opportunities. Number one it can immediately begin to sell power to all Vermonters through the existing utility distribution network, through what would be either a subsidized cost or a lower cost. We have the opportunity at the legislative level to decide whether we should give a benefit to the industrial manufacturing sector, and not do it just for IBM.

(Dillon) The panel met in executive session to go over the potential offers from some of the private companies. The state will also continue to follow the PG&E bankruptcy case to see when the hydro dams come up for sale.

For Vermont Public Radio, I’m John Dillon in Montpelier.

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