Vermont utilities prosper in financial turnaround

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(Host) Over the last two years, there’s been a dramatic turnaround in the financial health of Vermont two largest electric utilities. At one time, Green Mountain Power and Central Vermont Public Service were facing possible bankruptcy. Now they’re doing well in spite of a sputtering economy.

VPR’s Steve Zind looks at what’s behind the turnaround and what it means for Vermont ratepayers.

(Zind) In the midst of the carnage on Wall Street, Vermont’s major utilities are doing relatively well. Central Vermont Public Service is outperforming the S & P 500 by more than 28%. The company’s stock is also outpacing its industry peers. Green Mountain Power’s numbers are more modest, but still impressive according to Burlington investment counselor Eric Hanson. Hanson says the two utilities are attractive to bear market investors:

(Hanson) “Investors are looking at a relatively stable operation, a predictable amount of revenues and earnings, and a high dividend yield. In the case of Green Mountain Power, over 3.5%, and with Central Vermont, it’s over 5%, which looks awfully attractive when you factor in money market returns of 1-2%.”

(Zind) Hanson says utilities generally do well when the market suffers, because the demand for their product is fairly steady. And state regulators protect utilities from going bankrupt.

That’s what happened in Vermont last year when the Public Service Board agreed to let Central Vermont and Green Mountain Power pass the higher costs of Hydro-Quebec electricity along to ratepayers. Before the agreement, both companies were threatened with bankruptcy. The Board required the companies to make a number of concessions, including holding off on any rate increase requests until the beginning of next year. Since the agreement, the companies’ financial picture has brightened even more with the recent sale of Vermont Yankee Nuclear Power Plant.

Now state regulators are wondering if the Yankee sale should lead to lower electricity rates. Christine Salembier is commissioner of the Department of Public Service.

(Salembier) “Both companies are instructed by the Public Service Board to come in, in April of next year, to see whether or not their rates can be adjusted downward as a result of the sale of Vermont Yankee. The companies are suggesting the continuation of rate freezes. I think that’s really very good, but I still would like to have that conversation with the companies about whether or not rates can be reduced.”

(Zind) Mark Sinclair of the Conservation Law Foundation says now that Central Vermont and Green Mountain Power are in good financial health, ratepayers deserve a break.

(Sinclair) “In bad times, our ratepayers were there for our utilities and now in good times, I hope the utilities will give back to ratepayers. And that could happen in several different ways. It can happen through reduced rates, it can also happen through their investment in renewable green energy and in consumer choice.”

(Zind) Steve Costello of Central Vermont Public Service says last year’s agreement and the sale of Vermont Yankee have helped the company. But Costello says increased operating costs will prevent the utility from lowering rates.

(Costello) “Our goal at CV at this point is to try to keep our rates flat until at least 2006. If we can do that, that will be quite a feat.”

(Zind) Costello says its improved financial health means Central Vermont is in a better position to invest in new sources of power:

(Costello) “Part of that is certainly looking at renewable energy. We see two major roles for renewables, frankly. One is the straight development of new energy sources, wind being the most likely source. The other part of the renewables business that we’re hopeful that we can have an impact on is helping to develop businesses in Vermont that provide the infrastructure for the wind business.”

(Zind) Costello says there aren’t enough power suppliers in Vermont yet to make competition feasible. Mark Sinclair of the Conservation Law Foundation says if consumers could choose who they buy their power from, the competition would spur development of renewable energy sources.

For Vermont Public Radio, I’m Steve Zind.

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