My interest in merchant power plants began in September, 1998, when a proposal to site merchant electric generating facilities in Rutland and Bennington was announced. For the past year I have been researching the issues surrounding that proposal. After the pipeline company held meetings for property owners, I got calls from Vermonters who were very concerned about this particular gas project. The result was Vermonters for a Clean Environment, which is a people's organization. My testimony reflects the concerns of Vermonters as I have heard them expressed in public and private meetings over the last 10 months, and the experiences of citizens in surrounding states who have been involved with the siting of merchant power plants in their communities.

I would like to thank the committee for hearing my point of view. This is an exciting time in the energy marketplace. The issues are complex. Changes are happening rapidly. There are genuine opportunities for Vermonters to make smart choices.

H. 816 is a piece of restructuring legislation. It represents a major policy change for the state of Vermont by removing the requirement to demonstrate "need" for the siting of merchant power plants. For three decades, Vermont's energy policy has been to accept new generation facilities no larger than necessary and with the least environmental impact possible. Power plant developers have been required to show that need could not be met in a more cost effective manner through energy conservation programs and other measures. This bill proposes to remove those criteria.

Specifically it favors power plants that burn natural gas. Combined cycle natural gas electric generation technology promises to produce cheap electricity with less pollution than coal or oil plants. In this new marketplace, power plant developers assume the risks previously borne by the utilities and their ratepayers, and the theory is that competition and market forces will create lower prices and shut down dirtier power plants.

The reason natural gas power plants are now the industry standard is because they can be built quickly and profitably. The question is: are industry trends sufficient reason to abandon Vermont's energy policy to market forces?

The experiment of deregulation of the electricity marketplace that is occurring in surrounding states provides us with the benefit of their experiences. Coal, oil and nuclear plants are producing more electricity and more air pollution. There is no evidence that they will become uneconomic any time soon. Mergers and acquisitions are creating huge power companies and real competition has not yet occurred.

Relying almost exclusively on natural gas for new power generation does have risks. Within the industry, there is concern that natural gas exploration and development will not be able to keep up with the demand that is being created by the construction of merchant power plants. Demand for natural gas is increasing at a greater rate than projected. With 80% of new power plant construction to be fueled by natural gas, whether or not there will be enough natural gas in the future to meet the demand is an important consideration.

Fuel prices are experiencing historic volatility. A new pricing structure for natural gas transportation was announced three days ago that will reflect the distance the gas travels. Natural gas from Alberta, Canada and the Gulf of Mexico may become much more expensive than natural gas from Nova Scotia.

Environmental and economic costs associated with burning large quantities of natural gas can be anticipated. Natural gas is primarily methane, a potent greenhouse gas that contributes to global warming by venting, leaking and flaring. Merchant power plants that burn natural gas release large quantities of carbon dioxide, another greenhouse gas, into the atmosphere. Pollutant chemicals that are known to cause cancer, including benzene and toluene are put into natural gas during production. Respiratory diseases are associated with the pollution caused by natural gas. The health costs must be taken into account.

The power plants proposed for Rutland and Bennington would be the largest stationary source producers of Nitrogen Oxides in the state. Because of the complexities of the Clean Air Act and Vermont's participation in the Ozone Transport Region, merchant power plants may benefit from Vermont's anticipated receipt of a NOx waiver from the Environmental Protection Agency. Giving merchant power plants our clean air allotment has economic implications because otherwise they would have to purchase NOx offsets potentially costing millions of dollars annually. New or existing businesses wishing to expand that would employ more people in Vermont may find those business activities constrained. If Carbon Dioxide caps are initiated in the future, Vermont's clean air will become even more valuable.

Vermont's clean air and natural beauty are the envy of the country and are the primary reasons tourists visit Vermont. The impact of merchant power plants on the character of our state will have a detrimental effect on the tourism industry. Tourists do not come to Vermont to see power plants.

Any efforts to streamline the process of siting merchant power plants fueled by natural gas in Vermont must be accompanied by careful study of the marketplace and the potential economic benefit to Vermont versus the potential environmental and health costs associated with burning large quantities of fossil fuels.

"Need" is the central question. Do we "need" merchant power plants in Vermont? Do Vermonters "need" to share the burden of siting polluting electric generating facilities? Already more than 6000 new megawatts of electric generation have been approved for construction in New England. How many natural gas power plants does New England "need"? Is it good public policy to let the marketplace decide? Perhaps we should be looking at even more comprehensive changes to Act 248 to meet the needs of the rapidly-changing energy marketplace in harmony with Vermont's commitment to responsible energy use and facilitate the siting of wind farms and solar arrays that produce power that is preferred by consumers when they are offered a choice, and strengthen incentives for conservation.

Merchant natural gas power plants are being sited in all the states surrounding Vermont. More than three dozen proposals have been announced. Each state has a different process and some are working better than others. Shortcomings in Vermont's process have become clear to the citizens of Bennington and Rutland counties. Connecticut and New York have well-defined processes, and so I have borrowed from them to offer suggested changes to H.816.

The first problem Vermonters encountered in dealing with the recent natural gas power plant and pipeline proposal is the requirement for developers to send their plan to affected communities 45 days prior to filing with the Public Service Board. This requirement was interpreted by towns to mean the complete filing had to be submitted; however the gas company read it to mean they had to write a letter stating their plans. H.816 deletes the requirement altogether. Rather than delete it, Vermonters would like to see that section clarified to require a complete filing 45 days prior to filing with the Public Service Board. New York and Connecticut laws both have pre-application procedures. This is a copy of the pre-application filing for a New York merchant power plant. Preliminary filings give towns a chance to assess the potential impacts on their communities and identify the expertise necessary to help them participate in the process.

New York and Connecticut have more extensive notification requirements and party status. H.816 could be expanded in the interests of public participation, and clarified to describe the role of the agency of natural resources.

What constitutes a complete filing? Connecticut's requirements are spelled out clearly in their Application Guide. New York has Article X. Vermonters do not understand what is required, but have recognized the need to include meteorological monitoring, base line health studies, and interconnect studies in the complete filing.

New York has Intervenor funding. Connecticut does not. Citizens in New York do not think it is working well. However it points out an important question. When a multi-billion dollar company comes into Vermont and proposes a billion dollar energy project with complex technical issues, how do affected communities pay for the costs associated with participating in the process, even when they are in favor of it? Imagine how your town would respond to a 9000 page filing, such as the town of Athens, New York received for a 1080 megawatt power plant. New York recently increased the amount of money available to interested parties in merchant power plant sitings. Applicants pay into a fund that is distributed according to guidelines. For a 520 megawatt plant estimated to cost $300,000,000, intervenors will receive $300,000.

By contrast, a power plant was recently defeated in Connecticut by a unanimous 9 - 0 decision of the siting council which agreed with the numerous objections raised by the community, including the impacts of pollution on the high terrain surrounding the power plant site and the potential loss of housing construction jobs because nobody would want to live near a power plant. Citizens of the community hired lawyers and experts at their own expense which totaled $450,000. What would happen if any of our small communities were to receive one of these power plant applications? Could they afford the bill to review all of the legal and technical data that would be necessary to find out if this project is something the community would want? A merchant power plant bill in Vermont needs to find some mechanism for holding the applicant financially liable for all costs of proposed sitings.

Citizens in New York and Connecticut say that a major problem has been that local zoning decisions are being ignored in the rush to site merchant power plants. Respecting local regulations and providing the opportunity for meaningful public hearings are important parts of a merchant power plant siting process.

Through its energy plan and legislation, Vermont has stated its commitment to reduce dependence on fossil fuels and increase conservation and our reliance on renewable energy. Any new proposal to burn fossil fuels in Vermont must contain a proportionate commitment to renewable energy and conservation.

Repeatedly I have heard Vermonters say, "I can't believe they can use eminent domain to take private property for a for-profit project." Denying the right to exercise eminent domain for electric and gas transmission lines associated with merchant power plants is an appropriate public policy decision in this new energy marketplace.

Limitations on size, restrictions on peaking facilities, the use of Best Available Technologies which exclude water cooling, reserving a portion of the power for Vermont, not allowing merchant natural gas power plants to be sited on outstanding resource waters, excluding waste-to-energy facilities, clarification of the definition of benefits, mechanisms to compensate property owners for the decline of property values, and clear guidelines for tax payments are all changes to H.816 that will protect Vermont's environment and its people.

Deregulation should really be called reregulation. The marketplace cannot and should not be relied on to determine energy policy. The siting of merchant power plants requires clear guidelines with strict adherence to the rules and the opportunity for citizens, the voters, to be heard and effectively participate in the process. Any changes in Act 248 to facilitate the siting of merchant power plants should strengthen the protections for citizens and include changes that empower Vermonters to participate in our energy future.