Vermont power policy

While Vermonters debate the small break that Green Mountain Power has offered IBM in utility costs, New York uses huge reductions in electricity bills to improve its economy.

In the early 1990s, Vermont and New York had comparable utility prices. Under the Jobs for Power plan initiated in 1997 by Gov. George Pataki, New York has helped hundreds of businesses and non-profit organizations lower utility bills by up to 25 percent. The program works primarily by diverting power generated by efficient hydro dams near Niagara Falls to eligible companies and groups.

In New York, for example, IBM pays 5.3 cents per kilowatt-hour at its East Fishkill plant; IBM's base cost is 7.2 cents in Vermont. Under the proposed Green Mountain rate, which must be approved by the Public Service Board, IBM would pay 6.2 cents per kilowatt hour for 15 percent of the electricity used at its Essex Junction operation.

Even with the lower rate, Vermont is at a distinct competitive disadvantage with New York as regards utility costs, which are increasingly important for companies deciding where to locate, expand or maintain facilities.

The 2004 Legislature should take a serious look at state utility policy and how electrical rates fit into the state's economic future.

Since 1992, Vermont has offered "ecomomic development" rates for new power purchases tied to job creation. The latest IBM plan does not guarantee that the lower rates would enhance employment, which has drawn criticism from some Vermonters.

The issue covers a range of topics. Should the state rewrite its policy to enable more businesses to participate in IBM-type deals? Would the proposed purchase of hydro dams along the Connecticut and Deerfield rivers allow the state to follow New York's example and offer businesses lower electricity rates? Should residential customers pay higher rates to lower costs for businesses, as in New York?

Many states have adopted a system called "declining block purchases," which are similar to the IBM proposal in allowing what are in effect volume discounts for large consumers of electricity. That idea has not found much favor in Vermont because the state has preferred to stress conservation, rather than encourage consumption, as the cornerstone of its energy policy. Is that still a wise approach?

The proposed IBM-Green Mountain Power arrangement places utility issues at the forefront of the 2004 legislative agenda. These are complicated matters that require leadership and thoughtful discussion. Whether Vermont has a bright economic future may depend on how they are resolved.