Who’s Looking Out for Ratepayers?

Nobody thinks much about utility regulation…until it hits their wallet. It’s not a sexy nor easy topic, but is one that impacts about every household and business in the state. When your rates go up or your electricity is interrupted, it gets your attention – but then it’s too late. In Vermont, our gas and electric utility companies are monopolies and the majority of Vermonters are served by for-profit companies. That’s why we regulate them. Unfortunately, ratepayers don’t always get a fair shake in this murky and complex system. They don’t have a voice, unless regulators or advocates stand up for them. Thankfully, our Legislature is finally looking at this issue closely.

AARP Vermont believes that the public advocacy process of utility regulation is the most important aspect of the utility regulatory process. The public advocate, as its name suggests, should be in a position to not only represent the ratepayers in regulatory proceedings, but to actively and aggressively advocate for these ratepayers’ best interest -- particularly for residential and small commercial customers. We believe that the public advocate in Vermont, the Public Service Department, is not living up to this ideal and is in need of significant and immediate reform in four separate areas: (1) the Department’s independence; (2) its focus and orientation; (3) necessary resources to conduct its mission; and (4) its leadership.

1) Reform of Department Independence

AARP Vermont believes that the current Department reporting structure does not lead to complete independence of action as it relates to strong and aggressive ratepayer advocacy. Like many other state executive agencies, the Department is comprised of a department head (or Commissioner) that is appointed by the Governor and serves at the pleasure of the Governor, not at the pleasure of residential and small commercial utility ratepayers. If there is a public issue that is perceived to have broad public benefits, but one that will cost ratepayers dearly, the Commissioner will pursue strategies that promote the broader interests of the state, or the Administration that appointed him/her, rather than ratepayers’.

A poignant example of this conflict has been consistently underscored by the Department’s position in the Vermont Gas Systems (VGS) Addison Pipeline Project. This project has, even by VGS’ own analysis, significant ratepayer impacts, with questionable benefits, and yet has drawn virtually no critical comment or action from the Department.

2) Reform of Department Orientation and Emphasis

AARP Vermont believes that the Department’s current mission emphasis needs to be explicitly clarified to one that focuses on advocating for residential and small commercial customers. Our legislature recently passed a law to ensure this occurs, however, the Department has not embraced new practices to fulfill that mandate.

To date, the Department has tended to take public positions promoting “state-wide benefits” as opposed to “ratepayer benefits.” The Department is not pursuing its mandated mission in an effective manner since it fails to distinguish between the broader public good, on the one hand, and ratepayer advocacy, on the other -- the two, contrary to the Department’s beliefs and practices, are not synonymous. In treating them as synonymous, the Department not only wastes Vermont taxpayer resources but leaves open a ratepayer advocacy void that has to be filled by groups with limited financial resources like AARP Vermont -- or it goes unfilled altogether.

The Department, by pursuing regulatory policy strategies that are in the public good, rather than ratepayer interests, effectively duplicates the mission of the Vermont Public Service Board wasting valuable Vermont taxpayer resources. Further, in pursuing what is often a more neutral, less advocacy-oriented agenda, the Department deprives the Board of valuable input that it needs to make effective policy. It is the Board’s responsibility to sit in a quasi-judicial, quasi-legislative position of evaluating proposals, evidence, and other material, and rendering decisions that are in the broad public good. Vermont cannot afford to have a separate state agency pursuing similar strategies.

To compound matters, the Department regularly enters into settlement discussions and other back-door deals with utilities based on information provided by the utilities with no public transparency. These agreements often shift financial and other business risk away the companies and their shareholders and onto the backs of ratepayers.

Unfortunately, groups like AARP Vermont, and other non-profit consumer and public interest organizations are being required to fill a vacuum left by the Department’s failure to serve as an active consumer advocacy voice at the Board. AARP Vermontrepeatedly finds itself in positions where it effectively has to defend itself against the collective action of the utilities and the Department rather than having the Department as a partner in forcing utilities to deliver more efficient and cost-effective services. Something is wrong with a system where non-profit consumer groups are constantly expending resources to fight the Department.

3) Reform of the Department’s Advocacy Resources

AARP Vermont believes that structural reform of the Department’s mission alone will not be successful if it is not funded adequately. Utilities often spend hundreds of thousands of dollars, if not millions, on litigated proceedings before the Board. Structural reform without a sufficient funding won’t work.

4) Reform of the Department’s Leadership

Good organizations and institutions, in both private and public sectors, are usually driven by strong and effective leadership. AARP Vermont requests that any reform of the Department also include how the leader of this important state agency is selected. An effective ratepayer advocate needs to bring a set of professional qualifications in relevant fields (i.e., law, engineering, economics, finance), a proven level of professional experience related to consumer protection and/or advocacy, and is independent and encourages and actively seeks ratepayer input.

Vermont will continue to face a variety of important public utility-related issues over the next several years. The State needs a ratepayer advocacy agency that is independent, has adequate resources, strong leadership, and most importantly, is directly accountable to its clients -- ratepayers of our regulated utilities. The current structure is flawed and needs considerable and immediate reforms. At a minimum, we must eliminate any direct reporting requirement to the Office of the Governor, and create a reporting structure that leads to direct ratepayer accountability -- as opposed to bending to the political whims of a sitting governor.
AARP Vermont looks forward to continuing to work with , the Legislature and other stakeholders to give Vermonters the protection and representation they deserve.
--Greg Marchildon, AARP Vermont State Director