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Despite Increased Cost, Vermont Lets NatGas Pipeline Project Proceed

Vermont regulators have agreed to allow Vermont Gas Systems Inc. to complete construction of a 41-mile natural gas pipeline extension in the western part of the state, after the utility agreed to cap the amount it would recover from ratepayers for the project. The cost of the project has increased more than 78% since it was approved two years ago.

In a 52-page ruling on Friday, the state Public Service Board (PSB) declined to reopen a final order it issued in December 2013 when it granted a certificate of public good to Vermont Gas to build the Addison Natural Gas Project (ANGP).

ANGP is a 12-inch diameter, 41-mile pipeline that would extend Vermont Gas's natural gas pipeline system from Colchester in Chittenden County to Middlebury in Addison County. According to the PSB, when the project was first proposed it was estimated to cost $86 million (see Daily GPIDec. 26, 2013). The current estimate is $153.6 million.

"Although a number of circumstances have changed since our original decision, the most significant of which is the much higher estimated cost of the project, the new evidence does not alter our conclusion that construction of the pipeline promotes the general good and is in the best interest of the state," the PSB wrote.

The PSB added that it was swayed in large part by an October 2015 memorandum of understanding (MOU), between Vermont Gas and the state Department of Public Service (DPS), in which the utility pledged to cap the amount it would recover from ratepayers at $134 million, even if the final cost for the project is ultimately higher. That equates to a potential rate impact of 12.2%.

"After weighing the impact of the MOU and the evidence presented by the parties, we find that reopening our original approval is not warranted," the PSB said.

Vermont Gas spokeswoman Beth Parent told NGI on Monday that the utility plans to complete the project on time and on budget by the end of 2016.

"Today's decision concludes a thorough regulatory proceeding and we appreciate the opportunity to keep moving forward," the utility said in a statement Friday. "Our team will now be able to turn its full attention to the important planning and preparation necessary for our upcoming construction season."

The Vermont Fuel Dealers Association (VFDA) -- a non-profit trade organization that represents heating oil, diesel, kerosene, wood pellet and propane dealers -- opposed the project.

"If they spend $154 million building a pipeline and no one converts [to natural gas], there's some trouble for [Vermont Gas]," VFDA Executive Director Matt Cota told WPTZ-TV. "Then the rest of the ratepayers have to absorb the cost."

Natural gas to be transported through ANGP will originate in Western Canada.

In July 2014, Vermont Gas disclosed that the cost for the project had increased 40%, to an estimated $121.6 million. Two months later, the Vermont Supreme Court remanded an appeal of the original final order back to the PSB, in part to address the new cost information. The board declined to reopen the proceeding in October 2014.

Vermont Gas issued a second advisory in December 2014 that estimated capital costs for the ANGP project had increased again, this time to $153.6 million. The DPS subsequently filed a motion seeking relief from the PSB's original order. The state Supreme Court remanded the case back to the PSB last February, and the board held public hearings to discuss the matter in June and December.

Last February, Vermont Gas shelved a proposed second phase expansion of ANGP, citing increased project costs (see Daily GPIFeb. 11, 2015). Phase 2 would have extended natural gas service to an International Paper mill in Ticonderoga, NY.

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