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GREEN MOUNTAIN POWER CORPORATION
SEC FORM 8-K EXHIBIT 99
STATE OF VERMONT
PUBLIC SERVICE BOARD
Docket No. 6545
?jbentleyDelete [caption], click Insert, File, and select the caption document
for this DocketInvestigation into General Order No. 45 Notice filed by Vermont
Yankee Nuclear Power Corporation re: proposed sale of Vermont Yankee Nuclear
Power Station and related transactions )))))
GMP/DPS MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding (the "MOU" or "Memorandum") sets forth the
agreements reached between the Vermont Department of Public Service ("DPS" or
the "Department"), and Green Mountain Power Corporation ("GMP", "Green Mountain
Power", or the "Company") (together, the "Parties"), regarding GMP's Cost of
Service Studies for 2003 and 2004 ("COS" or "COS Studies"), as filed with the
Vermont Public Service Board ("PSB" or the "Board"), in accordance with the
Board's Order of June 13, 2003 in the above-referenced matter.
INTRODUCTION AND RECITALS
1. On August 22, 2001, Vermont Yankee Nuclear Power Corporation
("Vermont Yankee," "VYNPC," or "VY") provided the Board with notice, in
accordance with General Order No. 45 ("G.O. 45"), of Vermont Yankee's intent to
enter into a proposed Purchase and Sale Agreement (the "PSA") with Entergy
Nuclear Vermont Yankee, LLC (" ENVY") and certain related Transactions
concerning the sale of the Vermont Yankee Nuclear Power Station (the "Station"
or "VY Station").
2. By Order dated September 4, 2001, the Board opened an investigation,
pursuant to 30 Vermont Statutes Annotated ("V.S.A.") 2(c), 109, 203, 209 and
231, into the G.O. No. 45 notice filing of Vermont Xxxxxx's intent to execute
the PSA with ENVY as well as certain other agreements related to the proposed
sale of the Station.
3. On March 4, 2002, VY, ENVY, GMP, the Department and other parties entered
into a Memorandum of Understanding (the VY Sale MOU) modifying and clarifying
the requests for approvals pending before the Board at that time.
4. By Order dated June 13, 2002, the Board issued an Order substantially
approving the sale of the VY Station to ENVY pursuant to the PSA, and Vermont
Yankee's entry in the PPA and related 2001 AA with Green Mountain, all as
modified by the VY MOU.
5. In addition, the Order directed Green Mountain to file, in April 2003, an
updated cost-of-service based upon a test year ending December 31, 2002, with
appropriate additional information as necessary to determine whether a rate
decrease is appropriate in 2003 or 2004.
6. On April 15, 2003, Green Mountain filed its COS Studies as required
pursuant to the Order. The Green Mountain COS studies indicated that GMP's rates
should increase .73% for the rate year 2003 and 4.46% beginning on January 1,
2004.
7. Subsequent to the filing of the GMP COS Studies, the Department
investigated the COS studies and conducted informal discovery of GMP on issues
related to said studies.
COST OF SERVICE
8. The undersigned Parties have engaged in extended discussions and
review with respect to the GMP COS Studies.
9. As a result, the undersigned Parties agree that a change in GMP's
retail rates for 2003 and 2004 is not warranted. As a result, the Department
shall recommend to the Board that the Board should not open an investigation
into the reasonableness of Green Mountain's rates pursuant to 30 V.S.A. 227(b)
in this docket.
10. Except as set forth in paragraph 11 below, Green Mountain Power agrees
not to seek any other rate increase effective prior to January 1, 2007 (i.e., no
filing prior to 4/15/06). GMP and the Department further agree that in the event
of a major storm, power supply interruption or outage significantly in excess of
forecasted outage rates relating to Vermont Yankee, Hydro-Quebec deliveries,
Xxxxx, Stonybrook or XxXxxx generating facilities, or forced de-rating of the
Hydro-Quebec interconnection facilities, or major non-weather-related loss of
customer load resulting in revenue loss materially exceeding supply cost
savings, GMP may seek emergency rate relief pursuant to 30 V.S.A. 226(a) or
seek an accounting order from the Board permitting the deferral of costs
associated therewith. The Department will support any such request for an
accounting order. The DPS reserves its right to contest the ultimate recovery
of such booked and deferred costs.
11. To enable GMP to meet the requirements of this MOU, in particular the
extended stay-out provision in paragraph 10 and the cap on earnings in paragraph
17, the DPS agrees to a rate increase of 1.9% effective 1/1/05 and an additional
rate increase of 0.9% effective 1/1/06. Before each of these increases may go
into effect, GMP must make cost of service filings with the DPS and the Public
Service Board 60 days prior to each rate increase that support the rate
increase. If GMP earns in excess of the cap on earnings in paragraph 17 in 2005
or 2006, the full amount of such over-earnings shall be refunded to customers as
a credit on customer bills or applied to reduce regulatory assets as the DPS
shall direct. Any refunds to customers shall be implemented in a manner to be
agreed between GMP and the DPS and approved by the Board.
12. Green Mountain Power agrees to begin amortization of the following
regulatory assets beginning with the effective date of the January 1, 2005 1.9%
rate increase referenced in paragraph 11 above, on schedules to minimize future
rate impacts: (1) ACE amortized over 5 years instead of 2 years; (2) Pine Street
amortized over 20 years instead of 5 years, without a return. Each of these
amortizations shall be allowed in rates without further disallowance or
adjustment, according to these amortization schedules, until fully amortized.
13. DPS agrees to permit Green Mountain Power to carry over Docket No. 6107
deferred revenues through 2004.
14. Green Mountain Power agrees to offer to extend the IBM Economic
Development Agreement ("IBM EDA") on existing terms for 3 yrs at a fixed "Base
Amount" equal to the 2002 Base Amount (as the term "Base Amount" is defined in
the IBM EDA).
15. Green Mountain Power agrees to continue accrual-basis accounting of its
defined benefit plans through the stay-out period defined in this MOU.
16. GMP agrees that any transmission cost savings associated with PTF
treatment of Highgate and Phase I/II facilities will be applied to reduce
regulatory assets to the benefit of GMP's ratepayers as agreed by DPS and
approved by the Board.
EARNINGS CAP
17. While GMP's existing retail rates as established in Docket No. 6107
provide for an 11.25% allowed return on equity, to the extent that GMP's
calendar year earned rate of return on common equity on its Vermont electricity
utility operations in 2003, 2004, 2005 or 2006 exceeds 10.50% , the dollar
amount of such excess shall be applied first to reduce regulatory assets as
agreed by GMP and the DPS and approved by the Board. GMP shall file a report
detailing its core return on equity for calendar year 2003 and each year
thereafter through calendar year 2006 on March 1 of the next succeeding year.
Core Return on Equity shall be calculated excluding the operations of GMP's
unregulated subsidiaries and rental water heater program and is not the same as
the consolidated return on equity calculated for external financial reporting
required under GAAP.
REDESIGN OF GMP RETAIL RATES
18. Within sixty days of the approval of this MOU by the Board, GMP
shall file with the Public Service Board a fully allocated cost of service study
and rate redesign as well as a petition pursuant to 30 V.S.A. 218 and 225 to
redesign its rates.
19. The review of the proposed new GMP rate design shall be conducted by the
Board in a new docket opened for such purposes pursuant to 30 V.S.A. 218 et.
seq.
ALTERNATIVE REGULATION PLAN
20. GMP and the DPS agree to work cooperatively to develop an
alternative-regulation plan which GMP agrees to propose for approval pursuant to
30 V.S.A. 218d; the target for completing and filing an alternative-regulation
plan is 120 days after Board approval of this MOU. The Parties agree that this
MOU shall terminate upon approval of an alternative regulation plan proposed by
the Parties pursuant to this paragraph.
FINAL TERMS AND CONDITIONS
21. This MOU shall become effective upon the issuance of approval by
the PSB in the manner contemplated herein.
22. The Parties agree that this MOU and any Order approving this MOU
relates only to these Parties and should not be construed by any party or
tribunal as having precedential or any other impact on proceedings involving
other utilities. The Parties have made compromises on specific issues to reach
this MOU. The MOU and any Order approving this MOU shall not be construed by
any party or tribunal as having precedential impact on any future proceedings
involving the Parties except as necessary to ensure GMP's implementation of this
MOU or to enforce an order of the PSB resulting from this MOU. The Parties
reserve the right in future proceedings to advocate positions that differ from
those set forth in this MOU, and this MOU and any Order approving this MOU may
not in any future proceeding be used against any party except as necessary to
enforce GMP's rights and obligations under this MOU or to enforce an order of
the PSB resulting from this MOU.
23. Except as otherwise provided for herein, the Parties agree that this
Memorandum shall be effective, and shall bind the Parties hereto, only if the
Public Service Board issues an order in this docket containing terms consistent
with this MOU in all respects.
24. The Parties agree that should the Board fail to approve the MOU in its
entirety, the Parties' agreements set forth herein shall terminate if so
requested by either Party, in which case, the Parties shall have the right to
file additional prefiled testimony on all issues in the above referenced dockets
and the Parties' agreements shall not be construed by any party or tribunal as
having precedential impact on any future testimony or positions which may be
advanced in these proceedings.
DATED at MONTPELIER, VERMONT this 11th day of July, 2003.
VERMONT DEPARTMENT OF PUBLIC
SERVICE
By:/s/ Xxxxx Xxxx
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Xxxxx Xxxx, Esq.
GREEN MOUNTAIN POWER
CORPORATION
By:/s/ Xxxxxx X. Xxxxxxx, Xx.
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Xxxxxx X. Xxxxxxx, Xx., Esq.
