SUSTAINABILITY REPORT 2008 SECTION 2: Our Material Issues

Early in 2009 we performed a materiality determination to create a list of the issues of greatest significance to our stakeholders.  The most pressing material issues are large, intertwined issues that encompass financial, environmental, and social impacts.  Our material issues are directly related to Green Mountain Power's own triple bottom line of carbon, cost, and reliability. 

 

Material Issue #1: Vermont's Energy Future & Reducing Climate Change Risk

The most significant and complex material issue facing Green Mountain Power is preparing for Vermont's energy future.  Currently, Green Mountain Power is able to offer an enviable power profile that includes renewable generation and low reliance on fossil fuels (only 1.2% in 2008, not including market power).  This power profile is evidence of the company's commitment to reducing climate change risks and echoing the environmental views held by Vermonters. This power profile may change drastically after the contracts to purchase power from Hydro-Québec and Vermont Yankee expire in the next few years.  The expiration of these contracts is central to 

this material issue. This issue is further complicated by the global economic crisis, and rate payers' potential unwillingness to support the increased costs necessary to build/invest in new renewable generation. Green Mountain Power feels a strong obligation to provide cost effective power in long run, which is why the company is looking at building renewable generation itself so customers can reap the long term benefits.  This is a long- and short-term issue, particularly considering that there may be imminent opportunities for Vermont to explore potential renewable energy projects that may be supported (in part) by federal economic stimulus.  Also, Green Mountain Power is committed to supporting the local Vermont economy, which means investing in renewable energy projects within the state.

Green Mountain Power has a vision for an energy future that provides customers with power that has low carbon emissions, low cost and high reliability.  We know that low carbon can mean less price volatility. Our energy strategy, while is also our climate strategy, is firmly anchored in these three elements and recently has included the following components:

• Diversify our Power Portfolio and Plan for Expiration of Contracts. We need to plan for the expiration of our major contracts with Hydro-Québec and Vermont Yankee. In November 2008, we issued two RFPs in conjunction with two other utilities.This was the first of several staggered RFPs that we have planned over the next couple of years. The first RFP requested up to 40 megawatts for Green Mountain Power. The second RFP (issued with Central Vermont Public Service) requested 150 megawatts of new energy, and is contingent on the outcome of Vermont Yankee relicensing and contract negotiations. We have had numerous responses to our RFPs. Our decision will be made based on a variety of factors, including cost, energy source, long-term stability, and carbon profile.
• Expand In-State Wind Generation. In partnership with Kingdom Community Wind, and Vermont Electric Cooperative, we are pursuing a new wind power installation on Lowell Mountain. The wind farm being proposed would meet the annual electrical needs of approximately 15,000 average Vermont households. For more information, see http://www.kingdomcommunitywind.com/. Also, we have a letter of intent to negotiate a purchased power agreement with Iberdrola, which has received Vermont Public Service Board approval to build a wind plant adjacent to our six megawatt wind facility in Searsburg. Because the project is partially on National Forest Service land, it still requires additional approvals before it can begin construction.

Expand In-State Solar Generation.  We believe that encouraging small- and large-scale solar installations in the State is consistent with our energy strategy and our stakeholders' commitment to renewable energy. We know that our customers support our development of solar.  A survey in 2008 indicated that 80% of those surveyed thought it was a good idea for Green Mountain Power to make a major commitment to accelerate the adoption of solar energy by its customers.  Additionally, over 1/5 (22%) of those surveyed indicated that it was very likely that they would install solar energy in their homes.  We believe that the challenge for customers is the initial capital cost for installation, which can be difficult in a hard economy.  We are supporting solar generation

• in Vermont through our SolarGMP program and through renewable energy grants for companies (like Green Mountain Coffee Roasters and National Life) who commit to major solar installations. Our recently-launched SolarGMP program provides financial incentives to our customers who install solar generation at their homes and businesses.
• Continue to Engage Stakeholders. We know that our energy strategy is only as good as our stakeholder engagement. In 2008, we seriously ramped up our stakeholder engagement efforts to get feedback from customers, communities, employees, regulators, NGOs, and developers on our energy strategy and ways to significantly increase renewable generation.

Our energy/climate strategy has been developed in concert with consistent, multi-faceted stakeholder engagement.  One of our methods of engagement in 2008 was telephone surveys.  Customers were probed specifically on our energy strategy.  Here are some of the results:

 

This tells us that our customers support our energy strategy's prioritization of in-state renewable energy projects and the development of a grid that relies more heavily on renewables.  It also tells us that our stakeholders would support both large and small renewable generation projects.  Our strategy for prioritizing in-state renewable energy is described above and includes new wind and solar projects. 

Other Programs to Reduce Climate Risk

 

In addition to our long-term energy and climate change strategy (described above), which is intended to curb our carbon emissions, we have other programs designed to reduce our climate change risk:

• Working towards carbon neutrality in Operations. In 2007, we worked towards carbon neutrality in our operations, which includes our offices, facilities, trucks, and all business travel. This was achieved through various operational changes (biodiesel, alternative-fueled vehicles, energy efficiencies in buildings, etc.), but also through offsets. The offsets for our operations in 2007 were purchased from NativeEnergy and paid for by Gaz Métro. The offsets for our operations in 2008 will be with RGGI offsets, instead of purchasing offsets through Native Energy.
• Participation in The Climate Registry. This year was our first year participating in The Climate Registry. In June 2009, we reported our 2008 emissions to this voluntary program which will help us to establish an emissions baseline and track emissions. The emissions that were submitted will be reviewed by a third party to verify credibility.
• Choose2BGreen. This program provides customers with a way to neutralize their carbon footprint through renewable power and home heating and driving offsets. Specifically, customers can sign up for three different programs. With GreenerGMP, they may purchase energy from certified renewable resources equal to some or all of their monthly electricity use. CoolHome and CoolDriver provide customers with an option to offset their individual carbon footprint associated with heating their homes and driving their cars, respectively. These offsetting programs are offered in partnership with NativeEnergy.
• GreenerGMP. Our customers are now able to choose to pay a premium for all or a portion of their monthly electrical usage to demonstrate their support for renewable energy. Funds generated by GreenerGMP are used to support the methane gas project at the Moretown Landfill and biomass at the McNeil plant. In addition, beginning this spring, funds will support a farm-based methane digester in Westminster, Vermont. Approximately 824 customers participated in GreenerGMP at the end of FY 2008, which is somewhat disappointing, as we believe far more customers are interested in purchasing renewable power. Recently, we received regulatory approval for a 25% reduction in renewable energy rate for our customers to further encourage this program, so customer can now participate at three cents per kilowatthour. EN6

Key Performance Indicators Related to this Material Issue:

1.       % of Power Mix from Fossil Fuels in 2008 - 1.2%

2.       CO₂ Emissions from Power Generation in 2008 - 17,623 tons

For comparisons with previous years, see the "Power and Impacts" section of this report.

5.7.4     

Material Issue #2: Safety & the Work Force

As an electric utility, safety is consistently one of our top material issues.  With little room for error, a consistent safety record requires constant vigilance, a solid foundation of plans and procedures, and a commitment to compliance.  Green Mountain Power has discovered that with all of this in place, there is still something else that is necessary - a company culture of safety that goes beyond workplace tasks and extends to safety in all aspects of life, including life at home.  A recent workplace injury at Green Mountain Power has led to a renewed cultural focus on safety.   Employees working in the field agree that there is still room for improvement and better consistency.

Safety is both a short- and long-term issue.  In the short-term, safety is related to one-time, acute injuries.  Safety is also a long-term issue, as an aging work force deals with injuries sustained from years or decades working in the field.  Safety is also closely intertwined with another material issue facing many of the country's electric utilities - availability of skilled labor.  Electrical workers are highly skilled and offer years of invaluable expertise.  When this work force retires, Green Mountain Power must implement succession plans and strategies to ensure that its core competencies, including safety and reliability, are not comprised due to its changing work force.  Some employees feel there should be a greater focus on young apprentices who will be able to lead the work force in the future.  In 2008-2009 we added four lineworker apprentice positions, making six current apprentices in our workforce.

Our hope is that with our apprenticeship program we can effectively replace the aging work force as they retire, and that the new workforce will have significant work experience to maintain our excellent track record of reliability and customer service.

Some notable aspects of our safety program include:

• Monthly Safety Meetings. In the past, routine safety meetings were not consistently held. Now, there is a commitment to having the meetings on a monthly basis. Safety training is required per OSHA and we hold monthly meetings as part of our safety training program. Each worker is required to maintain a level of training and competency to be considered a "Qualified Person" as defined in by OSHA.
• Executive Safety Committee. In 2008, the Exec Safety Committee was part of our Labor Management Group. In 2009, we created a separate Safety Committee of employees passionate about safety (union and non-union) to discuss safety in a more general context and to focus on breeding a culture of safety. The Executive Safety Committee deals with specific safety concerns and policies and procedures.
• Daily Involvement. Safety is encouraged in every aspect of work. In meetings, our mantra "I AM GMP SAFETY!" is commonly spoken by all in attendance. Every working group is required to conduct tailboards for their work each day. Our first corporate value is "Delivering Fast, High Quality and Incredibly Reliable Service."
• Commitment to SHARP. All divisions of Green Mountain Power have met the requirements of the Vermont Department of Labor's Safety and Health Achievement Recognition Program (SHARP).
• Training. CPR and AED training is offered on a voluntary basis to all employees.

Key Performance Indicators Related to this Material Issue:

1.       2008 OSHA Injuries/Illnesses (total days and cases): 185 (increase from 100 last year due to one serious injury)

2.     % of Employees Over 50: 44% (increase from 43% last year)

We follow OSHA-required procedures for recording and reporting injuries and illnesses: 

 

We exceeded our safety benchmark this year due to one major injury and repetitive motion injuries.    We have put significant emphasis and effort into promoting a safety culture at Green Mountain Power, and have increased that effort since the injury mentioned above.  Repetitive motion injuries have resulted in most of the lost days as there were three workers who underwent surgery to relieve or repair long-term repetitive motion injuries.  These injuries were not the result of an acute accident and are representative of an aging workforce that has performed physical work for years.  Today's technological advances in tools, equipment and machinery will reduce these injuries moving forward, but the trend of repetitive motion injuries will likely continue for the next 5 years or so.

Our root cause analysis of safety incidents also indicates that they are primarily due to people not paying attention or to poor communication.  These causes have become part of the focus of our monthly safety meetings.

One challenge that we face is monitoring and reporting out on the safety performance of contractors and subcontractors working onsite or on behalf of Green Mountain Power.  We expect our contractors to comply with applicable health and safety requirements and adhere to their own safety protocols.  Beyond this, it is challenging to monitor every aspect of their safety performance.  We meet this challenge by setting a high safety standard for our own workers and encouraging them to report unsafe situations or to cease work performed by contractors if an issue occurs. 

In order to ensure the continued safety of our work force, we have taken the following steps to ensure that availability of skilled labor remains high, even when our experienced workers retire:

• We have an active apprenticeship program (there are 6 apprentices currently), where field workers undergo rigorous training and education side-by-side with seasoned workers. In addition to helping maintain our talented work force, the apprenticeship program is also an important way that we contribute to the future of Vermont's young people. One of our future goals for this material issue is to establish goals for our apprenticeship program (e.g., goals surrounding participation and results). We hope to include a discussion of these goals in our next report.
• We have succession plans for key positions that are reviewed bi-annually by the leadership team.
• Proactive and open communication to clearly understand individual retirement strategies for timely cross training and succession.

In addition to safety and succession planning, another important aspect of maintaining our talented workforce is attracting new employees.  While we hope that our environmental sustainability track records attracts new employees, we learned during our employee engagement that jobs with stable companies are in such high demand in Vermont, we are inundated with resumes.  New employees said that our environmental track record wasn't as important to them as other factors.  Overall, our stability and sustainability as a company will help us ensure that we always have a skilled work force.

Material Issue #3: The Recession

The current U.S. recession and contraction of the global economy is being felt by everyone, including Green Mountain Power stakeholders.  The arms of the recession can reach virtually every aspect of the company's operations, as well as its short-term (1-5 years) investment decisions.  It may make investing in new renewable energy projects more difficult, as developers and investors become more wary about pursuing new projects and access to capital is severely limited.  It may also affect day-to-day company operations; although, due to its already lean corporate structure, Green Mountain Power has a stable workforce and is not planning any layoffs or restructuring.  The most significant direct impact of the recession is on Green Mountain Power customers, who are finding it harder and harder to pay their electricity bills.  While lower income families may qualify for assistance, a quickly growing number of middle class families do not qualify for assistance and are struggling.  Green Mountain Power is discovering that the rate of disconnect notices is increasing for residential customers who do not receive assistance through our Energy Support program.

Currently, there are several programs to assist limited-income customers, including Green Mountain Power's Power Partners and WARMTH.  Customers are encouraged to contribute financially to WARMTH, which is a fund operated by Community Action agencies to help customers facing heating emergencies when all other assistance options are exhausted.  Green Mountain

Power matches the funds contributed by customers.  In 2008, nearly $40,000 was contributed by Green Mountain Power to WARMTH.

Power Partners is a program that is funded solely through Green Mountain Power's operations.  Green Mountain Power allocates $26,500 twice a year to customers who face electric service disconnection.  Community Action agencies qualify the customers for assistance, and explain that if the customer pays 25% of the disconnect amount, Green Mountain Power will provide a matching 25% credit to prevent disconnection. The customer must contact us to make a payment arrangement on the remaining balance. We have found that this is a compassionate way to help customers during a financial crisis, while providing additional motivation to pay their electric bills.

In 2007, we began a three-year pilot program called Energy Support Credit to assist limited-income customers.  We hope that the Pilot Program will help us and the state better understand the needs of the low-income community so that we can determine the best, most effective ways to help customers who struggle with their electric bills.  We initially provided a 10% discount on monthly energy charges to eligible limited-income customers, and in 2008 raised the discount to 25%.  Eligibility varies by size of family, but would typically include a family of four with an income of $41,300.  The program expired in spring of 2009, when the $1 million allocated to it ran out.  We are pleased that we were able to provide significant assistance to more than 3,000 customers over the past two years. 

We are still working on a future plan helping limited-income customers.  Vermont law has not allowed setting rates at anything other than cost-based, so we were unable to set up a permanent limited-income rate. However, the Legislature has given the Public Service Board the ability to consider a limited-income rate and the AARP has filed a proposal with the PSB. What we learned by operating the Energy Support program will be very valuable in the discussions to determine whether the regulators will approve an on-going program.

Our customer service staff is extremely skilled at working cooperatively with area community action agencies and our field personnel to identify customers who may be eligible for these programs. The staff also regularly refers customers to state programs that may offer additional assistance. Our customer service representatives develop relationships with customers, and are therefore more successful in helping them create affordable payment plans when they fall behind in paying their bills.

 

How the Recession is affecting Our Operations and Investments

Last fall, our leadership team started developing strategies and contingency plans for a recession.  Operating efficiency is a core value at Green Mountain Power, but it is especially critical now.  We have a history of providing superior service to our customers while controlling our costs.  In 2008 we cut management costs by eliminating two officer positions through retirement. Through careful management of all our resources, we now have 192 employees providing high quality service to 95,000 customers, whereas 15 years ago 387 employees served 80,000 customers.  We now serve 495 customers per employee, the highest ratio of any utility we are aware of.   We feel that this ratio helps to increase efficiency, but we have also considered whether we have too few employees.  Our analysis of safety incidents has not shown a link between fewer employees and more safety incidents.  In fact, many of our safety incidents are due to poor communication and inattentiveness.  With respect to quality of life with fewer employees, some employees wear "many hats" and indicate that they feel stretched a little thin, but we do not think our company is unusual in this way or that this is a material issue.  In general, our employee feedback has shown that our employees are very satisfied working at Green Mountain Power.

We have had success in keeping power costs down as well.  We have launched an intensive effort to keep power costs as low as possible with our vision of securing sources of power at below market rates, yet with very low carbon.  In the short term, we are looking for other ways to cut or defer expenses in order to keep rates as low as possible.  Specific cost-cutting measures are described in the Financial section of this report.

One of the most challenging concerns lately for the utility sector has been the cost of capital.  We, like all utilities and infrastructure businesses, need access to capital to maintain our system, to invest for reliability and to invest in new technologies and generation to deliver on our commitments to our customers. We find ourselves in a position where the cost of capital is higher than the return (profit) we receive on every dollar of investment.  This is causing many utilities to dramatically cut capital spending.  Green Mountain Power is committed to meeting infrastructure needs and investing for reliability, but any additional investment in Vermont for generation or other projects that could have value for customers is difficult when the cost of the investment is greater than the return.   We, like all Vermont businesses, hope this situation turns around soon.  The long term effects could be very challenging to navigate.

One aspect of our future strategy for managing our rising costs is to file for a 4.84 percent rate adjustment, which, if approved, would go into effect October 2009.  This increase is primarily due to factors that affect all utilities in the region, such as costs of upgrades to the New England transmission grid.  Less than half a percent of the rate increase will be due to changes in Green Mountain Power's operating costs that are under our direct control. During this recession, we know that any change in rates will be difficult for our customers, and in response we have taken extra steps to keep this increase as low as possible, including keeping payroll costs flat and cutting other operating expenses, as described above.   

Our customers have been very satisfied with our efforts to date, but that just means more is expected of us in the future. Our laser focus on customer satisfaction and efficiency is the best way to serve our customers.

Key Performance Indicators Related to this Material Issue:

1.       Number of customers receiving support through the Energy Support Credit pilot program: 3,226 (as of May 2009)

2.       Amount of assistance provided through the Energy Support Credit program: $868,024 through April 2009

3.       Number of residential disconnections for non-payment: 4,157 residential disconnections.

 

Material Issue #4: Education & Efficiency

 

As Green Mountain Power evolves as a utility, its customers must evolve as well.  Enhancing our power profile with more renewables cannot be successful without the support of customers.  We recognize that the benefits of renewable energy are long-term, but that it may be difficult for some customers to accept increased costs in the near term as a trade-off for more stable rates long term.  Rate increases may be inevitable in the short-term while initial capital investments in renewable energy projects are required.  Many customers do not understand that investment now will mean more stable power supply and rates for many years to come.  Understandably, customers are more concerned about paying their bills month-to-month and whether or not their jobs are secure in this harsh economy.  Education is absolutely crucial if customers are to support new projects.  Part of our strategy is also developing renewable energy in a more cost effective way by obtaining the capital and building the renewable generation ourselves, thus getting the long-term price stability benefits. 

Part of this education also means understanding (at least on a basic level) how power is generated and delivered to Vermont homes.  Coupled with some basic facts about electricity generation and regulation, customers also need more information about energy efficiency.  Efficiency is a large untapped resource, although Vermonters do have a good track record in being energy efficient.   More customers should learn the link between reducing their electricity use, enjoying more stable electricity rates in the long-term, and decreasing the country's reliance on climate-changing fossil fuels.  When this relationship is fully understood, customers may be more amenable to supporting Green Mountain Power's leadership role in Vermont's Energy Future.  With more education, customers are also likely to take more advantage of our GreenerGMP rate, which offers 100% renewable energy.

Educational and Engagement Strategies:

• Telephone Surveys: conducted throughout the year to obtain information on customer satisfaction and ask questions about our energy strategy. In 2008, customers were split as to whether they were informed of our energy strategy. 45% said that they had seen/heard/read about it, while 53% said that they had not. Customers were then provided with a brief introduction of our plans to meet future power needs by balancing the three objectives of reliability, cost minimization, and a low carbon footprint. Further questioning probed customer reactions to various components of the strategy.
• Choose2BGreen Blog: our blog highlights various aspects of our business and sustainability topics (like fuel efficiency and green building). http://blog.choose2bgreen.com/. Note: the blog is only periodically active.
• Fifth Annual Community Energy Fair (September 2008). Our Fair was special this year because it was held at Shelburne Farms, as part of its Harvest Festival. We use the fair as a fun and educational way to communicate directly with customers about energy efficiency and safety. Because the event was at Shelburne Farms, there was also a focus on local food and traditional arts and crafts. The Energy Fair in 2008 was sponsored in part by Entergy, Solar Works Inc., Efficiency Vermont, and Green Mountain Geothermal.
• Bill Inserts: We use monthly bills to communicate important and useful safety and energy conservation tips to customers, including how to be safe around electricity, electrical equipment, and power lines.
• Wind Tours: Part of our operating license at our Searsburg wind plant requires us to educate the community about the facility. We achieved this by providing educational tours to school groups and the general public during the summer and early fall. Tours are not scheduled during winter because of weather-related safety issues, and are restricted during fall and spring to avoid disturbing local bear populations during mating season and when cubs are first born. The Searsburg wind farm has become a tourist attraction, with approximately 1,000 people visiting the site each year.

 

Encouraging Energy Efficiency

In addition to the various educational venues that we use to educate customers about efficiency, Green Mountain Power created the Energy Efficiency Fund (the Fund) in March of 2007 as a result of our sale to Gaz Metro.  We will invest more than $8 million in energy efficiency and renewable energy by the end of 2012.  The goal of the Fund is to maximize financial and environmental benefits for our residential, commercial and industrial customers primarily through investments in energy efficiency.  The money invested in energy efficiency is expected to generate about $25 million in benefits for our customers over time.  Efficiency Vermont was selected to administer the Fund as a result of its extensive experience delivering statewide energy efficiency programs and services.  It will implement expanded energy efficiency services and provide incentives to Green Mountain Power residential and business customers.

Vermont Energy Investment Corporation (which provides services to Efficiency VT), in coordination with Efficiency VT, is taking the lead on all of the efficiency-related federal stimulus projects, as is appropriate in their role as the state's efficiency utility.  VEIC is part of the VT ARRA Utility Work Group and is collaborating with the state's utilities on all of their stimulus project proposals in order to find all possible efficiency connections.  For example, VEIC will be deeply involved in the PHEV demonstration project proposal in the greater-Burlington area to help fulfill the objective of studying the impact of PHEVs and vehicle-to-grid applications on the local distribution system.   Green Mountain Power, as the initial founder and facilitator of the work group, is working side by side with the state's utilities, including VEIC and Velco, to maximize its positioning for stimulus funding awards.

Green Mountain Power is not experiencing growth in its service territory right now, due to a combination of economic slowdown and increased energy efficiency as a result of efforts led by Efficiency Vermont.  Our long-term growth projections are quite modest, due to continued efficiency improvements.  We have an Integrated Resource Plan, which is periodically reviewed and updated, that includes efficiency as part of the energy portfolio.

EN6, EN18

 

Other Important Issues

In addition to the above four primary material issues, the materiality determination and employee engagement revealed several other material issues that are worth noting:

• Weather: increasingly volatile weather patterns and storms threaten the reliability of the power supply and represent substantial financial risk. For example, the ice storm in December 2008 (which only affected southern Vermont and was considered a relatively small storm) cost Green Mountain Power approximately $1.3 million to restore power to customers and repair damage.
• Internal Company Communications: with one central office as headquarters, some satellite offices feel distanced from company news and information. Also, despite efforts to bring those who work in the field into the corporate realm, there is still an "upstairs/downstairs" feel to company communications. This is offset in part by the CEO's Monthly Town Meetings held in each office/location.
• Lean Structure: Part of Green Mountain Power's brand is a lean staffing model. This has its benefits and has worked effectively from a cost and productivity perspective for ten years, but this also means that some employees feel overworked.

 

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SECTION 1: PERFORMANCE OVERVIEW                                         

SECTION 2: OUR MATERIAL ISSUES                                                

SECTION 3: THE SUSTAINABILITY OF OUR POWER PROFILE                     

SECTION 4: RESOURCE USE AND OPERATIONS                            

SECTION 5: EMPLOYER                                                                      

SECTION 6: CUSTOMERS AND COMMUNITY                                               

SECTION 7: FINANCIAL                                                                

SECTION 8: COMPANY FACTS & FIGURES                                       

SECTION 9:  GLOBAL REPORTING INITIATIVE (GRI) SUMMARY