Vermont Gas pipeline estimate jumps 27 percent; company says it's hitting 'reset' on phase 2

The incoming head of the natural gas utility working to extend a pipeline from Colchester to Vergennes and eventually Middlebury and Rutland said Friday the cost estimate for the first phase of the project is now $154 million, a 27 percent increase in the amount approved by state regulators in October.

And as a result of the new cost estimate, incoming Vermont Gas Systems CEO Don Rendall said the company would be "hitting the reset button" and asking the utility-regulating Public Service Board to delay considering the company's proposal for the second phase. Board hearings on the second phase are scheduled for next month.

The new figure is almost twice the initial estimate Vermont Gas Systems gave for the 43 miles from Colchester to Vergennes, which increased in July from its $86 million to $121 million.

Despite the cost increase, Rendall said the company still thinks the project is a good deal for customers.

"We are as committed as ever to delivering natural gas services to families and businesses in Addison and Rutland counties," Rendall said at news conference at company headquarters in South Burlington. "As you know, the project has encountered many challenges. Today we are hitting the reset button."

The first phase is designed to reach Vergennes, Middlebury and other communities. The second phase would deliver gas to additional Addison County communities, with a spur that would cross underneath Lake Champlain to serve the International Paper Ticonderoga Mill in New York.

The project has faced heated opposition from some along its route. Some cite safety concerns; others say it would increase dependence on fossil fuels at a time when people are trying to reduce it.

News of the latest cost increase drew swift reaction.

Gov. Peter Shumlin said he found it troubling.

"In the coming weeks my administration will be evaluating all of this new information and looking at these projects as a whole to ensure that they remain in the best interest of Vermont," he said in a statement.

Opponents say the increase shows the company cannot be trusted.

"Since the first cost increase in July, we've known that costs would continue to rise, at the expense of Vermonters who are struggling every winter to pay their heating bills," Will Bennington, a volunteer with the group Rising Tide Vermont, which has opposed the pipeline, said in statement. "Once again, Vermont Gas has shown that their word can't be trusted."

AARP Vermont asked utility regulators to take a close look at the project.

"Current ratepayers — especially seniors — should not be expected to absorb ever-rising costs for a multimillion-dollar project that will provide them no real benefit," said Greg Marchildon, Vermont state director.

Rendall said the latest cost estimate used the most recent industry standards and construction estimates. Rendall, who will become CEO on Jan. 1, said he would look into why the initial estimate was so low, but he said he wanted to remain open with the public about the process that is being followed now.

The company had hoped to complete construction — already underway — on the first phase in 2015. Rendall said that could now be pushed back into 2016.

Meanwhile, he said, the company had signed 80 percent of the easements it needs to build the pipeline to Vergennes.

"The purpose of the exercise, the purpose of the reset, is to take a step back and say 'how do we accomplish those goals?'" Rendall said.