Bills and Rates

Vt. public power authority helps ease COVID-19 financial burdens for its members

In addition to dealing with COVID-19, some Vermont public power utilities are also grappling with the financial implications of the pandemic, but the Vermont Public Power Supply Authority (VPPSA) is working to ease its members’ burdens.

Among the hardest hit is the utility serving the Village of Orleans in Vermont’s remote Northeast Kingdom. The village’s electric department has seen a 43.2% decrease in load compared with April last year, mainly as a result of the closure of the Ethan Allen manufacturing facility. On March 25, Ethan Allen temporarily closed its doors and sent 275 workers home.

Electricity use in Vermont has dropped abruptly since March 24 when Republican Gov. Phil Scott ordered non-essential businesses, including many in manufacturing, to suspend operations to limit the spread of the COVID-19 virus.

Since then, Vermont in late-April has begun to reopen its economy, allowing workers at some low-contact businesses, such as realtors, appraisers, municipal clerks and attorneys, to return to work. But many utilities have been feeling the effect of the stay-at-home order. While the utilities have experienced a small rise in home energy consumption, it has not been enough to offset the loss of commercial and industrial loads.

Several of VPPSA’s member utilities provide a sizeable portion of their electric service to large businesses, which makes them vulnerable to financial losses, VPPSA spokeswoman Julia Leopold said. VPPSA provides power supply and other services for 11 of Vermont’s 14 public power utilities.

The Village of Ludlow, for instance, typically relies on tourism from skiers who visit from the fall into the spring. The Okemo Mountain Resort in Ludlow’s territory has a large snow making operation that is partially powered by electricity. In April, the Ludlow Electric Light Department saw a 22.2% reduction in electricity use partly due to the resort’s early closure.

Two of the largest electric customers in the Town of Northfield are Norwich University and the Cabot Hosiery Mill, but with mandated school closings and reduced operations at the sock mill, the Northfield Electric Department experienced a 19.4% decline in electric load in April.

The loss of load deprives the utilities of revenues, but it also creates a collateral problem. The utilities end up with a surplus of electric power under the long-term power purchase agreements they hold.

So, they are forced to sell the power back into the wholesale market, often for less than the original purchase price since many other utilities are selling surplus power, putting downward pressure on prices.

Utilities with a larger base of residential customers are seeing smaller declines in load. The Morrisville Water & Light Department, for instance, only saw a 3.7% load decrease throughout April, and the Barton Village Electric Department, which serves mostly residential households, saw load increase in April by 3.7%. But even heavily residential utilities could face financial strains in the coming months.

Vermont recently extended the state’s winter disconnect prohibition. Following the governor’s declaration of a state of emergency because of the COVID-19 pandemic, the Vermont Public Utility Commission extended the usual Nov. 1 through March 31 ban on involuntary disconnections until the end of May. Between the combination of the winter disconnect rule and the new disconnect moratorium, some customers have not paid an electric bill since October 2019, Leopold said.

To help its members through repercussions from COVID-19, VPPSA is revising its financial policies to allow for more payment flexibility. VPPSA is also working with its lender to expand its line of credit to $10 million from $6 million. The request is currently in the approval process, “so it is not official yet, but it should be in place by June,” Leopold said.

The expanded line of credit would be in place for three years, but VPPSA would be allowed to reduce the line of credit. “We rarely have to use the line of credit that we have in place,” she said. “However, when the market is volatile, it’s a good resource to have.”

It is useful to have a line of credit because VPPSA pays ISO New England on behalf of its members every Monday and Wednesday, but bills its members for their portion of the bill on a monthly basis, which can create large swings in bills, Leopold said.

VPPSA’s member utilities are likely to see more unpaid bills in April because of the disconnect moratorium, she said. With the combination of revenue losses from load declines and the disconnect moratorium, if a utility has trouble paying for power, “we can float that cost for them using the expanded line of credit.”

“We’ve determined that with an expansion to $10 million, we can cover the power bills for all of our members for three months, which would be a worst-case scenario,” Leopold said. “Thankfully, we likely aren’t going to need this resource in the near-term because most of our utilities are in a decent place. But with so much uncertainty in the future, we want to position our members to remain financially stable for the long run. By assessing risks and proactively putting contingency plans in place, VPPSA can help Vermont’s community-owned utilities remain viable.”