In the end it was the mega-Canadian utility with Vermont roots that bested the mega-Canadian utility with no Green Mountain ties in the bidding war over Central Vermont Public Service.
CVPS is Vermont's largest utility and early today it announced that it accepted a purchase offer from Gaz Métro, a large utility based in Quebec, valued at roughly $710 million. The deal means that CVPS will merge with Vermont's second-largest utility, Green Mountain Power, if the deal is approved by state regulators and become one giant utility.
Combined, the new mega-utility will control about two-thirds of Vermont's regulated power market and own a substantial stake in the VELCO, the utility-owned electric transmission system. Gaz Métro also owns Vermont Gas, giving this provincial-based utility tremendous power in Vermont's utility market.
What could go wrong with one utility controlling two-thirds of the power market, eh?
GMP's President and CEO Mary Powell (pictured) will lead the newly-formed company, said Gaz Métro President and CEO Sophie Brochu. "She will assemble a strong local leadership team to guide the company forward.”
Powell spent the last few weeks meeting with Rutland officials who had concerns about the Gaz Métro bid, fearing that GMP would pull up stakes in Rutland and move all operations north to Colchester, where GMP is located. No so, said Powell. In fact, the new mega utility will have two headquarters and Gaz Métro/GMP have committed to investing money into downtown Rutland and regional development.
Powell has been the chief spokesperson for the Gaz Métro bid for CVPS, introducing her parent company's bid to Vermonters just several weeks ago. Gaz Métro made the bid after CVPS announced it was in talks with Newfoundland utility giant Fortis in response to that firm's $700 million purchase bid.
While Gov. Peter Shumlin was cool to the Fortis deal, he has been almost enthusiastic about the Gaz Métro bid. Powell chaired Shumlin's inaugural ball, which raised about $200,000 from private donors and corporate sponsors. Earlier this year, GMP got the support from Shumlin's administration to build a series of 400-foot wind turbines on top of Lowell Mountain, despite community opposition.
"Gaz Métro is excited to expand its operations in Vermont through the combination of CVPS and GMP,” said Gaz Métro's Brochu. “We believe that the combination of CVPS and GMP will prove deeply beneficial to our customers. Both companies share a vigorous commitment to community and customer service that is consistent with our corporate approach.”
Brochu, Powell and others claim that Vermont customers will "save" $144 million in the next 10 years. How? By offering us some cheap, Canadian-based single-payer health care?
Powell tells Seven Days that future savings will largely come through consolidation of the two workforces — CVPS has 530 workers and GMP 205. Over time, as employees retire or leave the company, work will be consolidated and equipment purchases and facility upgrades will be managed better across a larger customer base. A larger customer base will also give the new company a better negotiating stance when it comes to long-term power contracts and development of new energy sources in Vermont, Powell said. At the end of 20 years, Powell estimates the savings will approach $500 million.
"This will put us in a tremendous position to remain the lowest cost power in the region," said Powell. "There will still be cost pressures without a shadow of a doubt because New England's transmission and distribution system is aging."
The savings will flow to consumers in the form of stable, or reduced, rates approved by state regulators. Or, rates that won't climb nearly as fast as they would have if the two utilities had remained separate, Powell said. Because the utilities are regulated, the state's Public Service Board is the one who dictates how much shareholders earn and how much ratepayers can be charged.
Powell estimates that the merger proposal will be submitted the Vermont PSB in August, about a month in advance of a CVPS shareholder vote scheduled for September.
The sale is subject to approval of CVPS common shareholders, and federal and state regulators, and is expected to be completed in approximately six to 12 months.
In addition, Vermont taxpayers will receive an ownership interest in VELCO, which is estimated to reap about $1 million annually.
In a joint statement issued today, Powell and CVPS President and CEO Larry Reilly said: "CVPS and GMP will together become a stronger, more efficient enterprise, built on our deeply held mutual commitment to Vermont. We believe that this is not only a tremendous opportunity for CVPS and GMP, but for Vermont’s economy at this critical time. Our combined resources will allow us to continue to provide competitively priced power, which is necessary for vibrant communities and a growing economy, and strengthen our commitment to low-carbon electricity in sync with the environmental ethic of our state.”
According to the deal announced this morning, the merged company would:
• Commit to no layoffs other than some executive officer positions due to the consolidation, and to not instituting a mandatory relocation of Rutland employees. Under the combined company’s plan for customer savings, natural retirements and turnovers will be proportional between CVPS and GMP;
• Work with local leaders to find space in the downtown Rutland for a new facility — with a strong preference towards rehabilitating vacant downtown space — and work on a plan to repurpose existing CVPS facilities;
• Create a $100,000 “Open for Business” fund, to be administered by Rutland’s Downtown Partnership, to help continue the revitalization of downtown Rutland by subsidizing rent for several new businesses for up to two years. CVPS will provide half the funds immediately, with GMP providing the second half at closing;
• Create a $100,000 “Green Growth” fund, to be administered by the Rutland Economic Development Corporation (REDC), to support specific initiatives to advance green sector jobs and technologies. CVPS will provide half the funds immediately, with GMP providing the second half at closing;
• Kick-start a significant new “Solar City” program in Rutland. Building on CVPS’s renewable energy success with CVPS Cow Power™ and other programs, GMP will use its expertise in solar power to develop ideas such as a commercial-size solar orchard, small-scale backyard and rooftop solar, and deployment of other renewable energy technology.
The sale will also continue Vermont's ongoing asset takeover by Canadian firms. Aside from Gaz Métro's largesse, the dams along the Connecticut and Deerfield rivers are owned by TransCanada, a major Canadian utility that is involved in the controversial tar sands pipeline planned from Alberta to Texas.
In addition, Vermont receives a substantial amount of power from the provincial utility Hydro-Quebec.