On August 24, 2016

GMP to buy 14 more hydroelectric dams

By Mike Polhamus, VTDigger.org

Vermont’s largest electric utility has committed to purchase 14 hydroelectric dams in New England and to get power from two others—a buy that will net Green Mountain Power an added 17 megawatts of energy production for just over $20 million.

The dams will help the company, a subsidiary of Canadian-owned Gaz Metro, meet statutory requirements on the percentage of its power supplied from sources deemed renewable.

The arrangement includes a power purchase agreement between GMP and Enel, the Rome-based Italian state utility from which it’s buying the 14 dams. That agreement will secure further energy from two additional dams in Sheldon and in Ticonderoga, N.Y.

Four of the dams to be purchased sit in Vermont rivers, said GMP spokeswoman Kristin Carlson. They’re in North Hartland, Newbury, Hartford and Barnet. The remaining 10 are in Maine, New Hampshire and Massachusetts.

The 14 dams range in size from 0.4 megawatts to 2.78 megawatts and will add to the 32 dams GMP already owns, Carlson said.

Green Mountain Power revenue is based on capital assets it owns—and comes at a rate of return approved by state regulators—and not on power it purchases, company representatives have said. Opponents of GMP-owned projects have in the past argued this encourages the company to buy or build generators in order to profit off them, instead of buying power more cheaply on the market.

Carlson said that’s not why the company is buying the dams, and she added that dams GMP owns supply some of the lowest-cost power in the utility’s portfolio.

“The purchase of the Enel plants lowers costs for customers, and at the same time they’re increasing local generation and helping the state meet its renewable energy goals,” Carlson said. “They’re incredibly cost-effective for customers.”

Hydroelectric generators GMP already owns produce electricity at a cost of around 3 cents per kilowatt-hour, Carlson said. The dams to be purchased will supply power for about 8.5 cents per kilowatt-hour, she said, comparing that with solar panel generation at about 11 to 13 cents per kilowatt-hour.

“It’s really important for Vermont customers that we were able to come to this agreement,” Carlson said. “That’s basically the value of owning some generating facilities—because once they’re paid off, they generate power in a way that’s very cost-effective for Vermonters.”

The purchase was excluded from rate-setting proceedings for the next year because of uncertainty over when the purchasing arrangement would be completed, said Deputy Public Service Commissioner Jon Copans. Had they been included, they likely would have exerted “upward pressure” on rates, at least in the short term, Copans said.

“But there certainly is merit in utilities’ owning some generation assets such as dams,” Copans said. The department mainly concerns itself with ensuring that the cost of purchasing those assets doesn’t hurt Vermont ratepayers, and dams often represent a good value, he said.

A hydroelectric facility lasts long enough that any rate boost from the purchase is likely to be more than offset by its long-term value, Copans said.

Green Mountain Power has committed to submitting at least the 10 dams outside Vermont to the state’s Section 248 power-generation review process. The Public Service Department, whose job it is to look out for ratepayer interests, has not yet taken a position on the sale, Copans said, but is likely to by the time it’s asked to comment on the out-of-state dams for Section 248 proceedings. For the dams purchased within Vermont, GMP is required only to submit a 90-day notice to the PSB and the department, Copans said.

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