Green Mountain Power residential customers can expect their electricity rates to increase nearly 1 percent this fall, which is less than a third of what the utility had requested from state regulators.
The company sought a 3.53 percent increase when it filed rate-setting papers July 1 with the Department of Public Service.
The regulatory process took that down to 0.93 percent. The modest scale of the increase means Vermont will retain its rank among New England states as having the second-cheapest retail electricity, said Deputy Public Service Commissioner Jon Copans.
Green Mountain Power is Vermont's largest electric company, serving roughly 75 percent of customers.
The increase is to go into effect Oct. 1 and cover the next 12 months. It still needs approval from the Public Service Board.
The new rate comes via what's called an alternative rate plan, the details of which GMP and the department renegotiate every year.
Over the last six years, the results of these negotiations produced rate changes ranging from a 3.2 percent increase in 2011 to a 2.46 percent decrease in 2014, according to GMP records. This year's increase will be only the second in the last five years; electricity rates dropped three times since 2012.
No single item in the utility's rate regulation plan winnowed the increase to less than a third of what Green Mountain Power originally sought, Copans said. Through examination of the plan's numerous details, the department shaved fractions of percentages from many components, he said.
For example, he said, GMP predicted in its July 1 filing that the company should receive a 9.4 percent return on equity. The rate regulation plan contains a formula to calculate what's an allowable rate of return, and regulators at the department determined that formula allowed only a 9 percent return on equity.
The rate of return is based on the company's capital and its fixed assets, such as poles, wires and electrical generators, said GMP's chief communications officer, Kristin Carlson.
"There was no need for negotiation, but instead the numbers informing that equation those numbers shifted such that it resulted in a significant savings for customers," Copans said.
The difference between the requested and approved rate increases amounts to about $14 million that otherwise would have come from ratepayers, Copans said.
The small bump accomplishes the department objective of low rates that are stable, Copans said.
The slight increase proves Green Mountain Power is running its operation well, said GMP spokesperson Dorothy Schnure. Much of the rate-setting process consists of simply feeding into various equations numbers that represent current business conditions, she said. The fact that this data crunching says GMP requires less than a 1 percent increase shows it's an efficient organization, she said.