Power purchase agreements in state of flux for Vermont utilities 

BURLINGTON – Vermont utility companies are accustomed to sharing the cost of power, but a new rule that went into effect in September requires utilities closest to the power source to pay up.

The Public Utility Regulatory Policies Act (PURPA) of 1978 requires utilities to purchase power from producers regardless of whether its needed or not. For utilities in Vermont, the way those costs are distributed is changing in a substantial way.

James Gibbons, director of policy and planning for the Burlington Electric Department, said that until Sept. 15 the cost of power was distributed among all utilities in the state as a socialized cost. Under the new rules, the cost will be specific to the utility closest to where the project is built, which is how it’s done in most of the nation.

The change matters, Gibbons says, because utilities in northern Vermont are trying to figure out what to do with Swanton Wind, a controversial seven-turbine wind farm proposed for Franklin County. The renewable energy project is under consideration to be a PURPA project, but since it was submitted to the Public Service Board prior to Sept. 15, it’s unclear how the costs will apply to utilities.

“The new rule would require GMP [Green Mountain Power] to buy this power. The old rule would have given it to all the Vermont utilities as a pro-rated share,” Gibbons said.

If the old rule is applied, the share for BED would be 6.5 percent. Other utilities around the state also would have to chip in.

The idea behind the old way of implementing PURPA was that the state has a lot of very small utilities, and if a developer were to build a very large project nearby, the cost could overwhelm the utility. The new rule is designed to change the compensation structure so that it’s not as problematic for smaller utilities.

Gibbons also said he is concerned about the impact new energy development could have on other energy production in the same region. Specifically, energy grids are built to handle a certain amount of production at any given time, and it’s possible that new energy development could force existing power sources to be curtailed.

Worried that power from Swanton Wind might affect grid flow, Burlington Electric Department filed a motion to intervene with the Public Service Board.

“If all the wind units are going, we’re concerned that one or more would have to be scaled back, and the more power you inject into the area, the more you are going to have to scale back,” Gibbons explained.

As an example, if a transmission line can move 100 megawatts of power out of an area, and there’s 10 megawatts of load (demand) in the area, you can’t have generation serve more than 110 megawatts.

“(You have) 10 to serve the load there, and 100 you can export,” Gibbons said. “If your wind is trying to produce 150 megawatts, you can’t do it. Somebody is going to have to scale back their production.”

Rates of energy also have changed, and utilities need to know which set of rates apply.

“The rates that they requested [to charge utilities for the energy] were set, I believe, in February 2015. Since then the price of natural gas has fallen, so if you are made to pay a year-and-a-half-old price, you are paying too much.”

If a PURPA agreement is considered under the new rule, however, the cost issue would only apply to GMP, which would have to purchase all the power.

Gibbons said BED nevertheless wants intervening status because the company has other sources of power to the grid to consider, beyond what could be coming from Swanton Wind.