Seeking a more efficient rate review process and more accurate price signals for customers, Central Vermont Public Service has proposed a new regulatory framework encouraged by the Vermont Legislature.
CVPS's proposed alternative regulation plan, if approved by the Vermont Public Service Board, would set up an automatic quarterly review of the company's costs and rates, replacing the traditional ratemaking process,which is costly and time-consuming, taking nearly nine months.
"If approved, this plan will send customers much more accurate price signals, whether costs rise or fall, and will create incentives for the company to become ever more efficient," CVPS spokesman Steve Costello said. "The Public Service Board and Public Service Department would maintain oversight over the company and its rates, which would include a streamlined review every quarter, plus a more detailed annual review."
The Vermont Legislature has encouraged so-called alternative regulation of utilities, passing legislation in 2003 and 2005 to encourage proposals like CVPS's plan. The legislation was specifically intended to decouple the financial success of utilities from increased electricity sales, thereby encouraging energy conservation.
"The CVPS plan establishes a system of regulation in which the company has clear incentives to provide least-cost energy service to our customers," Costello said.
"The plan offers incentives for innovations and improved performance that advance state energy policy, such as increasing reliance on energy conservation," Costello said.
"Any cost savings that result from the implementation of the plan will be shared with ratepayers as determined by the Public Service Board," Costello said.
The plan, if approved, could also help improve CVPS's credit rating, which is currently non-investment grade. Standard and Poor's, the national rating agency, has listed the lack of a power cost adjustment mechanism as one of the key factors negatively affecting CVPS's credit rating.
"Improving our credit rating is critical as Vermonters examine the possibilities for our future energy supplies," Costello said. "A financially strong CVPS will give us more options for serving our customers, with lower borrowing costs."