The Lamoille County Transmission Dispute

Introduction

By 2007, a transmission project in northern Vermont had evolved into one of the most contentious utility disputes in the state. Utility executives were making regular trips to Washington, D.C. for FERC proceedings. Lawyers, settlement judges, regulators, utility managers, and board members were deeply involved. Newspaper articles appeared regularly. Positions hardened. Costs escalated. Yet despite months of effort, little meaningful progress was being made.

At the center of the dispute was a question that appeared straightforward: Who should pay for a transmission project whose cost had grown dramatically beyond its original estimate?

Background

The dispute originated with growth. Stowe Electric's largest customer, a rapidly expanding ski area, was adding electrical load at a pace the transmission system could no longer comfortably accommodate. Under Vermont's Act 250 permitting process, Stowe increasingly struggled to provide the required Ability to Serve letters.

VELCO proposed a new 115 kV transmission line. Early estimates were approximately $13 million. As planning progressed, estimates increased beyond $20 million and eventually public discussions referenced costs approaching $40 million. Utilities negotiated responsibility for portions of the project, and Stowe ultimately agreed to support approximately 54% of the cost.

At the time, the arrangement appeared manageable. Then the numbers kept moving.

Everybody Had a Reasonable Argument

As costs climbed, stakeholders increasingly viewed the situation through different lenses.

Stowe focused on affordability and the prospect of dramatic rate increases.
VELCO focused on tariffs, agreements, and precedent.
Other utilities focused on fairness and questioned why they should subsidize a project that provided little direct benefit.

Every position contained legitimate concerns. The problem was that no amount of argument seemed capable of producing movement.

The Conversation That Changed My Thinking

At one point, Stowe Electric General Manager Ellen Burt asked to meet with Burlington Electric General Manager Barb Grimes. Because I represented Burlington Electric in the negotiations, Barb asked me to participate.

What struck me was that Ellen spent relatively little time discussing project cost. Instead, she talked about consequences. She talked about rate impacts, the ski area, jobs, economic development, and the effect severe electric rate increases could have on the broader regional economy.

After Ellen left, Barb and I debriefed. Barb immediately understood the political and economic dynamics. She also felt trapped. Burlington received little direct benefit from the project. She could not justify shifting costs to Burlington ratepayers simply because Stowe had found itself in a difficult position. At the same time, she sympathized with Ellen and understood the pressure she was under.

Nor did she see much room for movement at the VELCO board. The dispute had become increasingly adversarial. Positions had hardened. Lawyers were involved. Everyone seemed stuck.

I remember Barb arriving at essentially the same conclusion as everyone else: I understand the problem. I just don't see a path.

That is where my mind tends to go to work.

When I encounter a situation that appears trapped, I start pulling on threads. Often those threads lead nowhere. Sometimes they reveal assumptions everyone has accepted without questioning.

As Barb talked through the situation, one detail kept bothering me.

Everyone was talking about cost.

Ellen had spent most of the meeting talking about rates.

Solving the Wrong Problem

Up to that point, nearly every discussion revolved around cost allocation.

Who should pay? How much should they pay? Was the allocation fair? Was it consistent with the tariff?

Those were legitimate questions. But they all assumed project cost was the problem.

The more I thought about Ellen's comments, the more I wondered whether everyone was solving the wrong problem.

What if the actual issue wasn't project cost?

What if the actual issue was rate impact?

To test the idea, I built several financial models. The project cost was fixed. But the burden imposed on Stowe's customers depended heavily on how those costs were financed.

At VELCO's carrying cost, the annual burden was enormous. At municipal borrowing rates, the annual burden would be dramatically lower.

The total project cost did not change.

The annual impact did.

For the first time, a possible path emerged. The leverage was not hidden in the project cost. It was hidden in the assumptions everyone was using to evaluate the project cost.

The Negotiations

The dispute did not suddenly become easy.

Settlement days in Washington were long. Each side sat in separate rooms while the settlement judge and staff carried proposals and counterproposals back and forth.

One afternoon, Stowe's attorney repeatedly entered our room and spoke privately with VELCO's attorney. A few minutes later he returned. Then again.

After the third visit, Burlington Electric's attorney, Fran Francis, stood up, picked up her binder, slammed it onto the table, and said:

"Are you going to tell us what the f--- is going on, or are we moving to the Stowe room?"

There was no laughter.

There was stunned silence.

Then VELCO's attorney apologized and explained what had been happening.

The moment stuck with me because it revealed something important.

People sitting on the same side of a dispute are not necessarily solving the same problem.

From Insight to Institution

Once a framework for a solution began to emerge, the parties gradually shifted many of the negotiations back to Vermont. Progress was finally occurring, and the settlement judge allowed longer periods between Washington sessions.

The key insight was simple. If the objective was mitigating rate impacts rather than reducing project cost, the financing structure itself could become part of the solution.

What followed was not a flash of brilliance.

It was months of work.

I still have a vivid image of conference rooms in the Burlington area filled with attorneys, utility managers, consultants, and executives. Thirty or more people sat around large tables with copies of the VELCO Operating Agreement, negotiating language line by line and sometimes word by word.

The idea had already won.

The institution had not.

The challenge was no longer whether the concept might work for Stowe. The challenge was whether it could be incorporated permanently into VELCO's governance structure.

The final Special Facility Equity structure became more than a one-time accommodation. It became a mechanism available to future projects as well.

The Result

Stowe ultimately accepted the settlement and purchased the special equity.

The structure remains in VELCO's Operating Agreement today and has since been used on numerous projects, both large and small.

Like most successful settlements, nobody got everything they wanted.

Stowe still bore substantial costs.
Other utilities accepted costs they would have preferred to avoid.
VELCO modified its governance structure.

Yet the settlement endured because it transformed a one-time solution into a reusable tool.

Final Reflection

Looking back, what I find most interesting is not the dispute itself.

The dispute consumed years of effort, generated legal proceedings, settlement negotiations, newspaper articles, and endless arguments about cost allocation.

What endured was something else.

The Special Facility Equity structure that emerged from those discussions remains part of VELCO's Operating Agreement today and continues to be used.

The irony is that almost nobody involved was completely satisfied with the settlement.

Yet the settlement succeeded because it stopped being a one-time accommodation and became a reusable tool.

Good solutions resolve disputes.

Great solutions become part of the system.

The dispute began as a fight over who should pay for a transmission project.

It ended by creating a financing mechanism that other utilities continue to use years later.

The breakthrough was not the financing structure itself.

The breakthrough was recognizing that everyone was trying to solve the wrong problem.

Strategic Judgment Questions Raised By This Case

What problem are we actually trying to solve?

For more than a year, participants focused on cost allocation. Who should pay? How much should they pay? Was the tariff being applied correctly? Yet the dispute only began moving when attention shifted from project cost to rate impact. The breakthrough came not from finding a better answer, but from asking a different question.

Are all stakeholders solving the same problem?

One reason the negotiations stalled is that none of the parties were actually trying to solve the same issue. Stowe focused on affordability and rate impact. VELCO focused on tariff compliance and precedent. Other utilities focused on fairness. Every position was rational. Progress occurred only after the underlying objectives became visible.

What assumptions have become invisible?

The dispute appeared trapped because everyone accepted the same framing. Once the assumption that cost was the central issue was challenged, entirely new options emerged. The leverage wasn't hidden in the numbers. It was hidden in the way everyone was evaluating the numbers.

Would a different framing change the available solutions?

Years of negotiation produced limited progress. Reframing the problem changed the range of possible solutions almost immediately. The lesson is not that negotiation is unimportant. It is that negotiations become far more productive when people are solving the right problem.

Can the idea survive implementation?

The key insight emerged during a conversation and a spreadsheet exercise. The implementation required months of negotiations, lawyers, executives, consultants, and detailed revisions to governance documents. Many people romanticize insights. Most underestimate the effort required to institutionalize them.

If the solution succeeds, does it become part of the system?

The settlement succeeded not because everyone became happy. In fact, nobody got everything they wanted. It succeeded because the resulting Special Facility Equity structure became a permanent tool rather than a one-time accommodation. Years later, the mechanism continues to be used. That may be the strongest indication that the solution was addressing the right problem.