AP, Barre Montpelier Times Argus
July 28, 2006
David Gram

MONTPELIER — The Douglas administration wants to boost spending on energy efficiency by 50 percent in the next two years. But that's about half what its consultant said would be cost-effective, and much less than environmental groups and key lawmakers want.

The Department of Public Service submitted a revised recommendation for spending on energy efficiency measures to the Public Service Board on Thursday. The board is expected by Aug. 15 to settle on a budget for the statewide energy-saving program Efficiency Vermont.

The board is doing that work in light of legislation passed last year that called on Vermont to pursue all cost-effective energy efficiency measures as a hedge against what many predict will be electric rate shocks in the coming years, as well as rapidly rising fossil fuel costs.

Efficiency Vermont's budget had been capped at $17.5 million per year, with the money raised through surcharges on electric bills that currently average 2.8 percent. The DPS is recommending raising the average surcharge to 4.2 percent, boosting the budget to $26.4 million by 2008, said its director of consumer and public affairs, Stephen Wark.

The department's consultant, GDS Associates Inc., said it would be cost-effective to increase the efficiency budget to $35 million a year. During the next 10 years, it said, that investment would save Vermonters $964 million off their electric bills — a three-to-one return on investment.

Under this scenario, GDS said, Vermont's electrical usage would be reduced by about 19 percent over what would otherwise be its projected 2015 consumption, GDS said.

The department's recommendation calls for a less ambitious 15.4 percent reduction in 2015's projected electricity demand. The main difference between its recommendation and GDS', Wark said, is that GDS does, and the department doesn't, call for switching some electrical devices like hot-water heaters to fossil fuels.

"We were concerned about the volatility of fossil fuel prices, and second, about the environmental impacts," of burning more oil and gas, Wark said.

Vermont's current peak electric demand, about 1,100 megawatts, is projected to grow to 1,260 megawatts by 2015 without stepped up efficiency efforts, Wark said, adding that the department's recommendation would reduce load growth to about zero.

Others say Vermont can and should be doing much more to invest in efficiency, and should be looking not just to eliminate growth in demand, but to reduce demand.

"We have to stop doing business as usual. We're facing a crisis in our energy future," said Rep. Robert Dostis, D-Waterbury, chairman of the House Natural Resources and Energy Committee and a key architect of last year's legislation. "We're short-selling ourselves by setting such low goals."

Vermont currently enjoys electric rates lower than some neighboring states because it has long-term power purchase contracts with the Vermont Yankee nuclear plant and the provincial utility Hydro-Quebec. But those contracts expire in 2012 and 2016, respectively. That's widely expected to leave Vermont much more susceptible to market forces in the energy field.

Administration officials have expressed concern that increasing the efficiency surcharge on electric bills would hurt the business and jobs climate by raising costs for Vermont's industrial companies, many of which are large users of electricity and already have taken efficiency measures.

Dostis said Thursday, "We have exactly the same goal. The only difference is I'm looking toward the future." He argued that businesses in other New England states are already experiencing double-digit increases in costs for electricity. Maximizing efficiency measures could soften the blow when Vermont's current low-cost power sources expire, he said.

Environmental groups including the Conservation Law Foundation and Vermont Public Interest Research Group argued in board hearings that even the doubling of the efficiency budget that GDS talked about would not be enough.

But the department's decision to make a smaller recommendation than was outlined in the GDS report falls way short of the mark, they said.

"The state is walking away from efficiency and affordable energy if it recommends a budget that leaves half the savings on the table," said Sandra Levine, a lawyer with CLF.

Not only does Vermont Yankee meet the electricity needs of the region, but its low-cost power significantly increases consumer savings on electricity. Furthermore, Vermont Yankee and its employees are proud of the facility's safety record and its ability to produce pollution-free energy, which goes a long way to keeping the Green Mountain State green.

As a result of the Power Purchase Agreement, Vermont Yankee has saved VT customers approximately $111 million and expects the total savings to be $250 million by the end of the agreement. Since acquiring Vermont Yankee in 2002, Entergy has saved its New England customers about $40 million. Vermont also benefits from the $100 million per year economic contribution through payroll, taxes and local purchases.

Today, it produces one-third of the states total electricity. The plant is Vermont's most reliable source of in-state electric power and provides vital power to homes, businesses, and health and municipal systems.