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No alternative: Vermont's Green Mountain Power goes traditional in rate case

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No alternative: Vermont's Green Mountain Power goes traditional in rate case

Vermont's only investor-owned electric utility, Green Mountain Power Corp., plans to file a traditional base rate request after operating under the state's alternative regulation system for the past ten years.

Green Mountain Power announced Dec. 12 that it intends to submit proposed electric rates by April 15, 2017, that will go into effect in 2018. Under traditional regulation, proposed rates are sent before the Vermont Public Service Board, can give rise to litigation and are settled privately. In comparison, under Vermont's alternative regulation system, which currently is used only by Green Mountain Power and Vermont Gas Systems Inc., the state's only investor-owned gas utility, rates are negotiated with Vermont's Department of Public Service and presented for final review and approval by state regulators.

Since 2006, the state's "alt reg" system has sought to enhance regulatory oversight by requiring utilities to review rates annually to ensure they reflect real-time costs of the utility and to stabilize energy bills. Whereas regulators under the traditional regulation system can set rates so utilities can have a reasonable opportunity to recover costs of service, the alternative regulation system can incentivize utilities to earn a larger profit if they meet certain performance goals or increase efficiency.

Despite the alt reg system's formulaic approach of reviewing and adjusting costs, electric rates and return on equity every year, instead of every 3-10 years under the traditional regulation, it has been criticized by AARP and others that claim it lacks transparency and accountability. An October investigation by Vermont Public Radio found that since 2011, Green Mountain Power regularly failed to provide adequate documentation of costs for infrastructure investments and regulators routinely allowed poorly documented projects to be added to the rate base. Republican Vermont Governor-elect Phil Scott has expressed support for possible legislative reform of the alt reg system.

"There is no better way to express our commitment to customers and transparency than to have a traditional rate case," said Mary Powell, president and CEO of Green Mountain Power, in a news release. "What's most important to us is that our customers have confidence in the process and believe their rates are fair and represent a good value for the service we provide."

Kristin Carlson, a spokeswoman with Green Mountain Power, said in an interview that the decision to go the traditional route really "came down to the timing" despite the utility's praise of alt reg. "We're at a point 10 years into this one model where we would have to decide," she said. "And we felt at this time that it made a lot of sense to do this traditional rate request."

"Also while this process is going on, regulators in Vermont [will be] working [on] ... what the next form of regulation will look like," continued Carlson. "So it made sense from that perspective as well."

"No matter the regulatory model, for us, it is about delivering the results for our customers," said Carlson.

To allow enough time for the traditional regulatory case to be reviewed, Green Mountain Power also will file with the Public Service Board a base rate freeze in the form of a waiver that requests an extension of the current rates until the end of 2017. Green Mountain Power stressed that its base rates have been lowered three times since 2013.

Both Green Mountain Power and Vermont Gas Systems are owned by Gaz Métro Inc.