Burning Cash: McNeil Opponents Zero In on the Plant's Losses 

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• File: James Buck
• McNeil Generating Station

For years a growing chorus of scientists and environmental activists in Vermont has argued that while trees are a renewable resource, burning wood to generate electricity is inefficient and bad for the climate. Now they're focusing on another inconvenient truth about biomass energy — its high cost.

Critics of Burlington's Joseph C. McNeil Generating Station are asking regulators to take note of the 40-year-old power plant's deepening financial losses before signing off on the city's plans to operate it for another 20 years.

McNeil is on track to lose $8 million this year, according to testimony submitted to the Public Utility Commission last month. McNeil has operated in the red in all but two of the past nine years, racking up a total of $29.2 million in losses.

"Any rational business owner seeing those losses would question whether you should keep running the plant or whether you should be looking at alternatives," said Nick Persampieri, a retired environmental lawyer from Burlington.

Persampieri and another Burlington climate activist, Pike Porter, have asked energy regulators to require the Burlington Electric Department to study decommissioning McNeil and switching to cheaper, lower-carbon energy sources such as wind, solar and hydro. BED operates and co-owns the plant.

Biomass energy plants in neighboring states have closed in recent years as public opposition to them increased, the cost of other renewable energy options dropped and the public subsidies on which they depend evaporated.

"New York and New Hampshire have closed biomass plants, not for environmental reasons but for economic reasons," Porter said. "But in Vermont we're meant to believe we're somehow different and immune to actual economic conditions, that McNeil burns fairy dust with no environmental or economic consequences."

Vermont's two biomass power plants, the 50-megawatt McNeil and the 20-megawatt Ryegate Power Station, continue to burn hundreds of thousands of tons of wood chips each year from trees harvested in Vermont, New York and New Hampshire. Proponents say they generate local, reliable, renewable power without burning fossil fuels, especially in winter when power demand is high and other renewables, such as solar, produce less energy.

Ryegate has struggled financially. Its parent company, Stored Solar, filed for bankruptcy protection in 2022. That year, Vermont lawmakers questioned the wisdom of the $5 million annual state subsidies the plant receives.

McNeil's finances are more complex. The plant is jointly owned by BED (50 percent), Green Mountain Power (31 percent) and the Vermont Public Power Supply Authority (19 percent). While utilities in Vermont are required to buy the power Ryegate produces, McNeil sells its energy on the wholesale market, leaving it more exposed to fluctuating prices and demand.

After holding city electric rates steady for 12 years, BED has raised rates each year since 2021. The latest 5.5 percent rate increase request filed with the PUC cites factors including the cost of a turbine upgrade at McNeil and low energy prices that have depressed McNeil's sales and left the utility in "a relatively weak cash position."

To explain the financial challenges facing McNeil, Persampieri and Porter tapped a veteran energy consultant, Paul Messerschmidt. He didn't mince words.

"McNeil's financial outlook for the future is dismal," Messerschmidt told regulators last month in written testimony.

The low cost of natural gas, which is used to produce much of the power in New England, means McNeil is unlikely to be cost-competitive anytime soon, he wrote.

In winter months when wholesale prices are higher, McNeil can run profitably, he noted, but that is not enough to offset its losses during the rest of the year. McNeil sits idle approximately half the year for maintenance or because it's not profitable to run.

"Based on the prices for wholesale electricity futures, it is likely that McNeil will generate substantial losses through 2029," Messerschmidt predicted.

Another key source of revenue for McNeil is also in jeopardy, he said.

Beginning in 2025, Connecticut utilities are expected to halve their purchases of renewable energy credits, or RECs, associated with the power McNeil generates. The Connecticut buyers pay a premium for the RECs. Since 2016, McNeil has earned $7 million to $12 million a year from the sale of the credits.

BED is exploring options, but the utility is likely to face a substantial revenue cut, Messerschmidt said. That, coupled with low wholesale power costs, means McNeil's losses "will likely continue to be substantial and in most years will likely exceed the more than $8 million net loss incurred in Fiscal Year 2024," the consultant wrote.

BED officials declined to comment, citing the ongoing case before the PUC.

In the past, however, they have pointed to environmental and financial benefits to justify the plant's continued operations. These include the jobs of loggers, truckers and 34 workers at McNeil and the economic benefit to forestland owners. They also have said McNeil protects ratepayers from seasonal spikes in power prices by allowing Burlington to generate electricity instead of buying it on the wholesale market. McNeil has fulfilled about 40 percent of the city's power needs.

But Persampieri and Porter say it is impossible for the public to assess just how much McNeil is costing ratepayers without a focused analysis comparing its costs with those of options, including wind, solar and purchasing power from the grid.

Every three years, utilities in Vermont have to submit to regulators a 20-year plan for safely delivering natural gas or electricity to their customers at the lowest environmentally responsible cost. The dense regulatory filings usually attract little attention. When Persampieri read the 353-page plan that BED submitted last fall, he said, he couldn't believe his eyes.

Despite increasing scientific consensus about the perils of burning wood for electricity and calls for McNeil to be shut down, the long-range plan assumed McNeil would operate for at least the next 20 years, he said.

"To me, that's just appalling," he said.

So, he and Porter decided to formally challenge BED's plan and asked for intervenor status in the PUC case. That means they'd be able to ask direct questions and submit expert testimony.

BED fought their request, arguing that the men didn't have an interest different from any other ratepayers. BED also argued that their intervention would drag out the process, cost ratepayers money and give the men a forum to air concerns better addressed to the Burlington City Council.

The hearing officer in the case disagreed and granted the request, with limits.

Now the two men are in the thick of a quasi-judicial proceeding, trading requests for information with BED and submitting their own testimony. The case has a long way to go, with a decision not expected until next year. But the activists' involvement already seems to have had an effect. The Department of Public Service, which advocates for ratepayers and the administration in utility cases, has agreed with some of their positions.

TJ Poor, director of the department's utility planning division, testified that BED's plan lacks sufficient cost analysis of various sources of electricity. In addition to McNeil, BED owns a hydroelectric plant on the Winooski River and a handful of solar arrays and also buys power from numerous wind, solar and hydroelectric facilities.

Poor told commissioners that BED's plan doesn't assess a "full range of potential futures associated with McNeil." He recommended that BED be required to better analyze the costs and benefits of its various power sources so that the public will have the comparison.

"We want to see the analysis of all of BED resources, including biomass, so we can see how they all stack up," Poor told Seven Days.

The department is recommending BED be required to complete the study six months before it submits its 2026 plan. That's not soon enough for Persampieri and Porter, who said the report should be conducted now. It makes little sense to require the utility to study options years from now when crucial decisions about McNeil are imminent, they maintain.

Last fall, BED won approval from the city council to pursue construction of a $43 million district energy project that would pipe steam from McNeil to the University of Vermont Medical Center.

Persampieri and Porter argue that investing in an aging plant with a poor economic outlook would lock in financial and environmental damages for decades. BED officials disagree and have said the project makes financial and environmental sense even if McNeil were to shut down and the steam were generated by an electric boiler. The complex project remains in limbo.

The future of McNeil could come down to politics.

On the campaign trail last year, Emma Mulvaney-Stanak pledged to "develop a responsible transition plan to close the McNeil plant." She was elected mayor in March, five months after BED submitted its plan to regulators. Now some supporters think she needs to make good on those promises.

Ashley Adams participated in a small protest in front of McNeil earlier this month. She and others argue that the power plant is far from carbon neutral, despite BED's claims to the contrary.

Adams supported Mulvaney-Stanak because she represented a "reset on McNeil" and a "turn toward honesty in climate policy." It makes no sense for the city's electric department to ask regulators to approve a plan that contains no discussion of retiring the plant when the mayor has called for exactly that, Adams contends.

"It flies in the face of the commitments she made to voters who worked their tails off to get her elected," Adams said.

Mulvaney-Stanak was not available for an interview. Her spokesperson, Joe Magee, noted that the plan would not bind the city to any project. A $20 million revenue bond that the city council approved on Monday night will fund upgrades to the plant, including a chip drier designed to make McNeil more efficient.

Magee did not answer follow-up questions about whether the mayor still supports a "transition plan to close" the plant or supports the proposed district energy project.

"The Mayor will continue to work in partnership with BED to pursue innovation, increase efficiency, and reduce emissions at the McNeil Plant," he wrote.

Correction, August 16, 2024. Joe Magee's name was misspelled in an earlier version of this story.