3. OVERVIEW OF GREEN MOUNTAIN POWER
- 3.1 Green Mountain Power History
- 3.2 Green Mountain Power's Vision
- 3.3 Financials
- 3.4 Indirect Economic Impacts — Reliable, Affordable Power
Reporting Entity Name: Green Mountain Power
Headquarters: Colchester, Vermont, U.S.A
Owner: Northern New England Energy Corporation (a wholly-owned subsidiary of Gaz Métro)
Number of Employees: 193
SD 2.8
Green Mountain Power transmits, distributes, and sells electricity and utility construction services in the State of Vermont in a service territory with approximately one quarter of Vermont's population and 94,000 customers. In 2006, our shareholders overwhelmingly approved a merger with Northern New England Energy Corporation, a wholly-owned subsidiary of Gaz Métro, a leading Quebec energy company with a long history of investment in Vermont. As of April 2007, the merger was completed, but we continue as a locally-run company that is regulated by the state of Vermont.
Figure 3-1 compares our power generation over the past four years.
Figure 3-1: MWH Generation 2004-2007
SD 2.8
Today, 84% of Green Mountain Power's electric distribution system is above ground. Figure 3-2 shows the different elements of our transmission and distribution system. EU 3
Figure 3-2: Green Mountain Power's Transmission & Distribution (T&D) System
3.1 GREEN MOUNTAIN POWER HISTORY
Green Mountain Power Corporation traces its origins to 1893, when the Vergennes Electric Company was organized to provide street lighting for the community of Vergennes, Vermont. Our 114-year history as an electric utility also began when private entrepreneurs dammed some of Vermont's waterways to create power to run mills, streetcars, and, eventually, the state's economy in western and central Vermont.
Today, Green Mountain Power is headquartered in Colchester, Vermont, and serves approximately 94,000 customers in nine counties and 122 different communities. We sell electricity and energy services and products to approximately 25% of Vermont's retail electricity customers and we sell wholesale electric power in New England and provide operations services to other utilities in Vermont.
Over the past three years, the number of customers in our major customer classifications has been as follows:
All of our customers are within the State of Vermont. SD 2.7; EU 2
Figure 3-3 (below) shows our service area, and Figure 3-4 shows our retail sales and line transmissions for 2004-2007.
Figure 3-3: Green Mountain Power Service Area
Figure 3-4: Retail Sales and Lease Transmissions, in GWh
3.2 GREEN MOUNTAIN POWER'S VISION
Green Mountain Power is committed to:
- Be the most efficient electric utility in the United States with a long-term focus on distribution and distribution services.
- Deliver superior energy services to our customers.
- Be environmentally responsible.
- Be a premier employer that leverages technology and invests in highly trained people.
SD 4.8
3.2.1 Organizational Changes at Green Mountain Power in 2007
In December 2007, Mary Powell was named to succeed Chris Dutton as president and chief executive officer when he retired in August 2008, thus bringing to fruition a leadership transition plan started five years ago. Ms. Powell has been a key driver in the restructuring of Green Mountain Power from a traditional electric utility to a high performing company that is now noted for using technology to drive customer satisfaction and to produce consistently strong financial results. With her promotion to the CEO position, Ms. Powell became a member of the Green Mountain Power Board of Directors. Mr. Dutton remains a member of the Board following his retirement as CEO. Ms. Powell served as senior vice president and chief operating officer at Green Mountain Power. Ms. Powell joined Green Mountain Power in 1998 after experience as a business owner and in business management at the executive level in both the public and private sector.
SD 2.9
3.3 FINANCIALS
Green Mountain Power prepares annual and quarterly financial statements. These reports are available on Green Mountain Power's website at www.greenmountainpower.com.
3.3.1 Rate Regulation
On December 22, 2006, the VPSB approved a 9.09% rate increase for the Company, effective January 1, 2007. The rate increase allows the Company to recover increased power and transmission costs in 2007 compared to 2006. The VPSB also approved the Company's 2007 Alternative Regulation Plan, effective for three years beginning February 1, 2007.
The 2007 Alternative Regulation Plan includes the following principal elements:
- A power supply cost adjustment mechanism (the power supply adjustor) under which the Company will recover or credit to customers, on a quarterly basis, 90% of power supply costs that are $300 (per quarter) higher or lower than power supply costs included in rates.
- An allowed rate of return on equity (ROE) of 10.21% for 2008 and 10.25% for 2007. The allowed ROE adjusts annually, up or down, for one-half of the change in the ten-year Treasury bond rate.
- An annual earnings sharing mechanism under which the Company has the opportunity to earn up to 75 basis points above its allowed ROE and to recover earning shortfalls in excess of 125 basis points below the allowed ROE. Under the plan, certain exclusions, commonly made in setting rates, are applied to determine the Company's earnings and are expected to affect adversely the Company's ability to earn its allowed rate of return on equity for core utility operations.
- Base rates will be adjusted annually, based on the Company's cost of service. Non-power supply cost increases are capped at no more than $1.25 million in 2008 and $1.6 million in 2009, exclusive of ROE adjustments and extraordinary costs in excess of $600 per year. Base rate adjustments must be approved by the VPSB.
- The VPSB retains the authority to investigate the Company's rates at any time and to modify or terminate the plan.
Figure 3-5: Earnings per Share and Dividends Paid
3.3.2 Corporate Governance
Institutional Shareholder Services ("ISS") rates the quality of public companies' corporate governance. As of September 25, 2006, Green Mountain Power's corporate governance quotient had been better than 90.5% of S&P 600 companies and 65% of Utilities companies. The chair of the highest governance body is not an executive officer at Green Mountain Power.
The membership of our Board of Directors has changed slightly with the purchase by Gaz Métro, but they still meet quarterly with our senior management team on a formal basis, and speak more often informally. The Corporate Scorecard sent to the Board each quarter includes evaluation of environmental and socially responsible efforts. Senior management reports to the Board on operational issues, which would include sustainability issues. Mary Powell has ultimate responsibility for sustainability issues. The Board of Directors committees include Audit, Compensation, and Governance.
Every employee is evaluated on environmental performance in his or her individual scorecard. That performance is reviewed by each staff person's manager. LA13, SD 1.2.6, 4.1, 4.4-4.10.
3.3.3 Membership in Organizations
Green Mountain Power belongs to the following groups and organizations:
- Vergennes Partnership, Inc
- Addison County Chamber of Commerce
- Vermont Chamber of Commerce
- Vermont Utilities for Electrical Education
- Addison Economic Development
- Renewable Energy Vermont
- Greater Burlington Industrial Corp.
- Associated Industries of Vermont
- American Wind Energy Association
- Green Mountain Economic Development
- Great Falls Regional Chamber of Commerce
- Central Vermont Chamber of Commerce
- Vermont Business Roundtable
- Energy Council of the Northeast
- Edison Electric Institute
- Vermont Historical Society
3.4 INDIRECT ECONOMIC IMPACTS — RELIABLE, AFFORDABLE POWER
The economic health of Green Mountain Power's service area is affected by the services we provide. First, the cost of electricity is a major factor for the success of businesses in Vermont that must compete with businesses located elsewhere in the U.S. and the world. Electric rates in New England are among the highest in the country, but Green Mountain Power's overall rates rank lowest among New England's 16 large investor-owned utilities. Green Mountain Power's commercial and industrial rates are the lowest in the group and its residential rates are third lowest. The reliability of Green Mountain Power's service also has positive indirect economic impacts. If reliability were not as strong as it is, it could affect businesses' decisions to locate or remain in Vermont.
In 2007, Green Mountain Power's overall electric rates, as measured by revenue per kilowatt-hour, were the lowest among the large investor-owned utilities in New England, according to a report released by the Edison Electric Institute. Green Mountain Power's rates are more than five percent lower than Central Vermont Public Service, the utility with the second lowest rates overall. According to CEO Mary Powell, "Other utilities across New England have experienced large rate increases because of rising fossil fuel costs. Our exposure to the volatility of the fossil fuel market has been minimal…"
In December 2006, the Company received approval from the Vermont Public Service Board for a rate increase of 9.09 percent effective January 1, 2007, with an allowed rate of return of 10.25%. The rate increase was driven by rising wholesale power and transmission costs. Green Mountain Power anticipated this rate increase and is confident that, despite the increase, rates are likely to remain the lowest overall. EC9
3.4.1 Reliability and Retail Sales Stats
Green Mountain Power has committed to our customers, our regulators and ourselves to continuously improve on reducing the frequency and duration of outages. Our results for 2007 with respect to System Average Interruption Frequency Index (SAIFI) and Customer Average Interruption Duration Index (CAIDI) are shown in Figure 3-7. Also, Table 3-3 compares our Service Quality Performance Index over the past two years.
Green Mountain Power's customers experienced fewer outages in 2007 than in recent years, exceeding standards set by Vermont regulators.
An analysis of the causes of all the outages in Green Mountain Power's system during 2007 shows that outages caused by tree branches within the rights-of-way were at the lowest point in five years. Upgrades to the system and a fast response to the outages meant that the total amount of time customers were out due to tree branches within the rights-of-way was well below previous years.
Green Mountain Power had an average of 1.38 outages per customer, with an average duration of 1.79 hours. Although utilities are allowed to exclude major storms from these calculations, Green Mountain Power's vegetation management and storm restoration efforts enabled the Company to restore power quickly enough that none of the severe storms last year met the exclusion standard. Green Mountain Power's performance was significantly better than the national average of 2.3 hours per outage, as reported by the Edison Electric Institute.
Although trees caused the most outages in 2007, other significant causes were equipment failure, other weather events and animals.
The Company also met or exceeded all of its service quality standards in 2007. It answered 85 percent of calls within 20 seconds, well above the 75 percent standard as well as achieved 90 percent overall customer satisfaction. Table 3-3 summarizes the Service Quality Performance Index results.
Table 3-3: Service Quality Performance Index
Finally, Green Mountain Power's rates have a direct economic effect on our residential customers, in that the size of their electricity bill affects the amount of disposable income they have to spend in the local market. Figure 3-8 shows how Green Mountain Power's residential rates compare with the other large investor-owned utilities in New England.
Figure 3-8: Average Residential Rates of New England Large Investor-owned Utilities
