Rutland Herald
September 18, 1998

Business Interests See Benefits to Pipeline

By Bruce Edwards
Herald Staff

Proponents of a proposed gas pipeline say it has the potential to give the region a needed economic jolt, making Rutland and Bennington counties a more competitive place to do business.

And they say just the potential of a natural gas pipeline making its way from New York through southern Vermont could also have an additional benefit of spurring the Legislature to pass legislation that would deregulate the electric utility industry.

For David O'Brien of the Rutland Economic Development Corp. a natural gas pipeline is an obvious advantage.

"Just the mere presence of natural gas is a benefit to retaining and recruiting companies to the area," said O'Brien, REDC's executive director.

He said availability of natural gas is invariably one of the questions companies ask when they're considering relocating or opening a new business.

Because it's cheaper and cleaner burning than other energy sources, O'Brien said a number of existing industries would probably take a serious look at converting to natural gas if it were available.

"I think GE.  I think OMYA could benefit from that.  I think Killington," he said, referring to three of the area's largest industrial users.

He said as is the case with "any of these heavy manufacturing firms...energy is a major factor on their profit and loss statement."

Killington Ski Area President Allen Wilson summed up his reaction to the pipeline in one word:  "huge."

"I am very, very excited about it," Wilson said Thursday.  "It allows us another source of energy to replace our diesel compression.."

Not only is natural gas less expensive, but Wilson said replacing diesel fuel with natural gas to run Killington's snowmaking machines would fulfill a state air quality mandate that calls for the ski area to phase out its diesel compressors by the year 2007.

He said in all likelihood Killington would build a small gas-fired electric generating station.  For that to happen, he said the gas pipeline would have to be extended up Route 4 to Sherburne.

Wilson said approximately 10 percent of Killington's annual expenses are related to energy purchases.  "I think it's a huge, huge boon in solving the region's power woes," he said.

Lance Matteson of the Bennington County Industrial Corp. said the benefit of having access to natural gas is obvious.

"Any time you can add a ready supply of natural gas to the industrial infrastructure it's a big gain," he said.  "It's clean; it's cheap; it's safe really."

He said lack of natural gas has put Bennington County at a competitive disadvantage with other parts of the country. He said natural gas could replace electricity, propane or fuel oil used to run equipment in the manufacturing process.

Matteson cited Mack Molding and Chemfab as two potential customers of natural gas.

Although he said it was too soon to say whether Mack Molding could take advantage of a natural gas pipeline, company president Donald Kendall said Thursday that natural gas would be good for Vermont. "It's clean and it's cheap," he said. "It's a pretty good combination."

"It's a real problem for us," he said. "We're a power intensive business."

As a comparison, he said the company's plants in the south buy power for half the kilowatt-hour cost of what it costs in Vermont.

For residential customers, there are potential savings as well. According to the state Public Service Department, a residential customer of Central Vermont Public Service Corp. who pays $336 a year to heat their hot water would pay $68 a year for natural gas, based on Vermont Gas Systems rates.

Eileen Simollardes of Vermont Gas Systems Inc. said a customer who uses natural gas for their home heating needs (heat, hot water) pays an average of $698.54 a year.

"Simollardes pointed out, however, that VGS rates are the lowest in New England and gas rates for Rutland might be higher: She also said while home heating oil is relatively inexpensive at the present time, the price of fuel oil is also more volatile.

Vermont Gas Systems, which serves Chittenden and Franklin counties, is the only natural gas supplier in the state. A subsidiary of Montreal-based Gas Metropolitan, VGS has 30,000 customers in the two counties.

According to the Chicago-based Gas Research Institute, the average price paid for natural gas in New England in 1995 was $5.56 per million British thermal unit compared to an electric rate of $30.69 per million Btu. For the year 2000, the GRI is projecting that natural gas in the region will drop to $5.32 per million Btu while electricity will decline to $27.76 per million Btu.

But supporters of the pipeline added a word of caution to their otherwise upbeat assessment of the proposed pipeline, potential customers of natural gas, whether residential or industrial, would also have to weigh the cost to convert their current fuel systems.

Two natural gas-fired electric generating plants would be built in Bennington and Rutland. They make the project economically viable for the developers, economic development officials and energy experts say.

Iroquois Pipeline Operating Company and Energy East corp. are the partners who hope to build the pipeline, while Vermont Energy Park Holdings would build the two plants -- a 1,000 megawatt plant on Park Street in Rutland and a 225-megawatt plant at the site of the former Johnson Controls plant in Bennington.

The plants would generate electricity to sell to the out-of-state market, making the project economically feasible.

Without the power plants, there would not be enough demand for natural gas in the two counties to warrant construction of the pipeline, according to Matteson of the BCIC.

However, Matteson said if the Legislature opened up the electric utility industry to competition that could make cheap gas-fired electricity from the plants available to residential, commercial and industrial customers in Vermont.

In the current regulated environment, he said Central Vermont Public Service Corp. has the exclusive franchise to sell electricity in its service territory.

CVPS spokesman Steve Costello said the utility regarded the pipeline announcement as a positive development. Costello said the news of the proposed pipeline is just one more example "of major players in the industry in the energy business who want to become players in the Northeast."

That in turn, Costello said, could give the Legislature added incentive to move next year on legislation that would deregulate the electric utility business.

Costello acknowledged that natural gs is cheaper than electricity. But he also said that availability of natural gas to potential customers would depend on where the pipeline is built.

He added that it was too early to predict whether CVPS would be hurt by the introduction of natural gas into the area. A loss of commercial and industrial customers could force CVPS to shift more of its costs onto residential customers.

In 1997, residential usage made up 27 percent of CV's megawatt sales, commercial represented 26.1 percent, industrial represented 12.2 percent and wholesale (municipal electric sales) 34.5 percent.

William Steinhurst of the PSD said in the short-term a pipeline might hurt CVPS, if a few large industrial users switched to natural gas. In the long-term, however, Steinhurst said the availability of natural gas could spur economic development. If that development results in one or two large industrial users, he said CVPS could in theory come out ahead. But Steinhurst, like Costello, cautioned it was too early to predict how such a scenario would play out.

In Chittenden County, Vermont Gas Systems and Green Mountain Power Corp. compete in the same market. In the case of the IBM plant in Essex Junction, the computer chip maker uses a mix of natural gas, electricity and fuel oil to meet its energy needs.

IBM uses natural gas for all its heating needs and in the manufacturing process, said Jeffrey D. Couture, IBM's communications manager.

"Clearly, it's a lower-cost alternative," he said.

For Rutland and Bennington counties, Couture said the prospect of natural gas "will add some flexibility and a competitive choice."

The head of a consumer advocacy group was also equally optimistic on the potential benefits of the pipeline.

Brian Keefe of the Vermont Electricity Consumers Coalition said the benefits of the relatively inexpensive, clean and safe energy were obvious. He said the only question is whether Vermont joins the rest of New England in taking advantage of the move toward natural gas.

"This type of project is new for Vermont but it's typical of what's happening all over New England," Keefe said. "These two power plants, one in Bennington and one in Rutland, those are two of 40 or 50 that are planned for New England."