Dams could save money

June 25, 2003

By SUSAN SMALLHEER Southern Vermont Bureau

MONTPELIER — An energy planner for the Department of Public Service said the state could generate power at a series of hydroelectric dams on the Connecticut and Deerfield rivers 20 percent cheaper than a private utility.

David Lamont told members of the Vermont Renewable Power Supply Acquisition Authority Wednesday that his preliminary “tabletop” analysis showed there would be savings in both borrowing money and paying income taxes.

Lamont said a state power authority wouldn’t pay corporate income taxes, but that it would be expected to pay property taxes, or a payment in lieu of taxes, to either the Vermont or New Hampshire towns where the facilities are located.

Lamont said that the six dams on the Connecticut and six dams on the Deerfield weren’t the perfect energy match for the state at the current time, since the 500 megawatts generated at the dams are for peak demand times, rather than base load, such as Vermont Yankee nuclear power plant.

But Lamont said that in about a dozen years, when contracts with Hydro-Quebec and Vermont Yankee’s owner expires, it would be much more valuable. Vermont gets two-thirds of its power from those two sources.

William Gallagher, the executive director of the Vermont Public Power Supply Authority, a nonprofit group that works with the state’s municipal utilities, said the Connecticut River dams presented “a very unique opportunity, a very large purchase.”

The dams are part of US Gen New England, which is owned by the National Energy Group, which is owned by PG&E. The dams were first put up for sale more than a year ago.

Gallagher said that one factor was the federal relicensing of some of the Connecticut River dams in 2018. Historically, he said, the Federal Energy Regulatory Commission cuts a project’s power production in order to lessen the environmental impacts.

And Lamont said hydro projects do have impacts on aquatic life in the rivers.

Gallagher said that PG&E paid $4,000 per kilowatt hour for the hydro system when it bought it in 1998 from New England Power Co. New generation currently costs about $500 per kilowatt hour, he said.

“They simply paid too much,” Gallagher said.

Gallagher said that the current price of electricity is “extremely high,” and the hydroelectric system was currently “making a lot of money” for US Gen.

Gallagher noted that the city of Holyoke , Mass. , recently purchased the Holyoke Dam. That dam also used to be owned by New England Power Co.

The renewable power authority met for the first time Wednesday in the State House. Chairman Michael Smith, administration secretary, was given the power to start the process to hire a consultant to evaluate whether buying the dams from a subsidiary of bankrupt energy giant PG&E made sense.

Smith said after the meeting that he expected the authority would hire that consultant at its next meeting in July.

The 2003 Legislature appropriated $250,000 and established the study authority, which must make a recommendation by Dec. 1. And it is generally believed that a consultant would take at least 90 days to do such a study.

John Sayles, deputy commissioner of the Department of Public Service, said that US Gen New England was about to declare bankruptcy so it can reorganize its debt; in fact, it is expected by the end of June.

But Sayles said the bankruptcy would probably have little or no effect on the sale of the dams.

He suggested that the state intervene in the bankruptcy, when it is filed, so that it receives information about any possible deal for the dams.

US Gen New England also includes two fossil-fuel generating plants in Massachusetts and another in Rhode Island . So far, US Gen hasn’t shown a willingness to break off the hydro facilities from the three fossil-fuel plants, he said.

Brascan, a Canadian firm, has been the only company mentioned publicly about the energy group, but Sayles said there didn’t appear to be any purchase and sales agreement.

Sayles said his conversations with PG&E’s Vermont lobbyist, Timothy Meehan of the firm Wilson & White in Montpelier , had not revealed any deal.

Smith and David O’Brien, the commissioner of the Department of Public Service, both said they had open minds about the proposal. Other panel members, including Rep. Robert Wood, R-Brandon, said he was concerned that the finances were too risky.

Richard Saudek, a Montpelier attorney who now represents the town of Rockingham in its legal battles with US Gen over local taxation, urged the authority to think creatively.

Three Rockingham town officials attended the meeting; the town is considering forming a municipal utility and buying the dam at Bellows Falls .

“Thinking out of the box is very much in the Vermont tradition,” Saudek said.