Hydro-Quebec Ordered To Refund Vermont $20 Million (U.S.)

MONTPELIER, Vt. -- An international arbitration panel has upheld Vermont's power import contract with Hydro-Quebec, but said the provincial power company must pay Vermont utilities more than $20 million US - an amount rejected by the Quebec electricity supplier.

"As things now stand, Hydro-Quebec will continue to provide power to Vermont under the terms of the original contract," said Robert Rogan, vice-president of Central Vermont Public Service Corp.

A Hydro-Quebec spokesman in Montreal said the utility was willing to negotiate satisfactory compensation but not $20 million US. "We're prepared to offer a sum of money," Hydro-Quebec spokesman Nicolas Carette said, noting it would be more in the range of $6 million to $7 million US, without interest, and "less than $20 million." The decision came in a long-running arbitration of a dispute stemming from Hydro-Quebec's failure to ship power south for 66 days following a devastating ice storm in January of 1998.

The Vermont utilities that receive power under the contract, known collectively as the Vermont Joint Owners, had asked the panel to void the contract, saying the outage showed that Hydro-Quebec did not have the high-quality transmission facilities promised when the contract was finalized in 1991.

Rogan, spokesman for the Vermont Joint Owners, told a news conference that Vermont's contract with Hydro-Quebec "called for the utility to ensure a highly reliable supply of power to Vermont for 30 years, beginning in 1991."

The 1998 ice storm toppled power lines and transmission towers throughout southern Quebec, and led to sharp criticisms from a Canadian commission that investigated Hydro-Quebec's preparedness for such a storm that the utility had done a poor job in maintaining its system.

Hydro-Quebec had argued throughout the arbitration that the ice storm outage was a result of an act of God for which it should not have to bear responsibility.

Rogan said that during the outage, the Vermont Joint Owners "paid millions of dollars under protest for electricity that was not delivered during the 66-day period. Despite our repeated requests, Hydro-Quebec refused to refund this money."

Carette said that the provincial utility was more than ready to talk to the Vermont companies.

"We want to sit down with them," he said. "They are business partners. We are interested in maintaining relations with them."

The arbitration panel has given the parties until June 1 to work things out. The arbitration panel, made up of one Vermont designee, one Hydro-Quebec designee and a third person agreeable to both, was set up just to deal with any disputes that arose under the contract.

The arbitration came against a backdrop of dissatisfaction in Vermont with the high costs of the Hydro-Quebec contract, which, for much of the 1990s, was costing Vermont's utilities more than what they could have bought power for on the open market.

The Vermont Public Service Board for a time balked at allowing CVPS and Green Mountain Power Corp. to recover from ratepayers the full costs of the Hydro-Quebec power, saying the utilities had been imprudent to strike the deal in the manner they did. That stance, since relaxed, produced warnings of possible bankruptcy from the companies.

More recently, some utility analysts have said the Hydro-Quebec deal looks better in comparison to a regional energy market that has seen sharply rising prices for the past 18 months.