PAVILION OFFICE BUILDING 109 STATE STREET MONTPELIER, VERMONT 05609-0201	STATE OF VERMONT AGENCY OF ADMINISTRATION	OFFICE OF THE SECRETARY TEL: (802) 828-3322 FAX: (802) 828-3320 MICHAEL K. SMITH, SECRETARY

December 1, 2003

Senator Ann Cummings
    Chair, Senate Finance Committee
Representative Bill Johnson
    Chair, House Natural Resources & Energy Committee
Senator Ginny Lyons
    Chair, Senate Natural Resources & Energy Committee
Representative Mark Young
    Chair, House Commerce Committee

Dear Senators Cummings & Lyons, and Representatives Johnson & Young:

Attached please find the consultants’ reports to the Vermont Renewable Power Supply Acquisition Authority (“the Authority”) on the feasibility of the State acquiring the hydroelectric dams along the Connecticut and Deerfield Rivers. The reports have provided needed direction to the Authority to ascertain the best course of action for the State of Vermont to pursue in evaluating the potential purchase of the dams. Certain portions of the report have been redacted in order to ensure potential negotiating positions are kept confidential. The Authority has decided to look further at two alternatives and report back to the legislature at a later date with a final recommendation. Those alternatives are: (1) to purchase an interest in the dams along with a private partner; or (2) to enter into a purchase power contract upfront through the new owner of the dams. In fact, the Authority will be meeting with potential private energy companies in December to examine the potential of these alternatives.

Four things should be noted. First, the dams are currently not for sale. Although US Gen (the owner of the dams) is currently in bankruptcy, the creditors committee is still working on a reorganization plan. It is assumed that they may take one of three possible directions: (1) determine that the company should come out of bankruptcy as an on-going entity; (2) sell all the power assets as a package (including all the dams in Massachusetts, as well as the three fossil fuel plants) to the highest bidder; or (3) break up the assets and sell components to the highest bidder. It is estimated that it could be as long as March before a final decision is made.

Second, a successful strategy in which the State of Vermont could buy the entire hydroelectric system, on its own, on the Connecticut and Deerfield Rivers is not feasible. A private partner is needed.

Third, the likelihood of succeeding in any purchase, even partnering with a private company, is estimated by the consultants at only 7.5%.

Fourth, to venture further ahead will probably mean further appropriations in the upcoming session.

If you have any questions regarding this interim report, please do not hesitate to give me a call.

Sincerely,

Michael K. Smith
Secretary of Administration
Chair, Vermont Renewable Power Supply Acquisition Authority

MKS/rrs

Attachments:

VRPSAA Project Update (PowerPoint Show, 708KB)
VRPSAA Study Results and Conclusions (PowerPoint Show, 700 KB)