RUTLAND, Vt., May 5, 2005 (BUSINESS WIRE) — Noting myriad success over the company’s recent and 75-year history, CVPS President Bob Young expressed optimism for the future, despite a rate reduction and refund ordered by state regulators.
“I’m sure many of you are concerned, and this recent order certainly presents us with challenges as we move ahead,” Young told shareholders at the company’s 75th annual meeting. “But I want to assure each and every one of you of one simple thing: Your employees, from the board of directors to the men and women who run this company on a daily basis, will do what it takes to overcome our challenges. We’re developing a plan to meet them head-on, and we’ve already begun to implement some immediate cost reductions.”
The Public Service Board recently ordered a rate refund totaling $6.5 million and a rate decrease of 2.75 percent, or $7.2 million. Standard and Poors put CVPS on CreditWatch with negative implications as a result. Young noted that the effect of the order was largely a one-time hit, and he assured shareholders that CVPS would continue to provide exceptional customer service and reliability, and maintain its 92-cent dividend. He outlined the company’s plans, which include everything from cost-cutting to a request for reconsideration of parts of the PSB order.
Young added that the company is working hard to maintain its investment-grade credit rating. “A downgrade in our credit quality can affect borrowing costs, operational flexibility, and the terms of important contracts such as those for power supply,” he warned.
“We are seeking reconsideration of parts of the order; lowering spending in ways that will minimize any effects on customer service or reliability; loaning, rather than giving, funds to Catamount for wind project development; and seeking a new line of credit,” Young said. Catamount is a CVPS subsidiary focused on U.S. and U.K. wind projects.
“CVPS has undergone targeted, strategic cost-cutting over the past decade, cutting employment from about 800 in the mid-90s to 540 today. Most recently, we’ve used our Right Way to Work program to improve how we do our jobs and work ever-more efficiently,” he said. “The Right Way to Work program has been very successful, driving millions of dollars out of our cost structure and helping to improve service across the board. At the same time, we are in the process of identifying annual, ongoing cost cuts to provide longer-term financial stability for the utility in 2006 and beyond that minimize impacts on customer service and reliability.”
Young noted that CVPS had had just one rate increase since 1999, but pledged to focus on other avenues before filing a new rate case. “At some point, given cost pressures every business faces, we will have to file a new rate case, but for now, we will implement the plan I’ve just described,” he said. “Clearly, this rate case outcome was disappointing, but this company has overcome greater problems in the past, and I have every confidence that we will resolve our current situation. We have an extraordinarily dedicated group of employees at CVPS, and they give me tremendous confidence in our short- and long-term future.”
Young said that confidence was based on a variety of recent successes, including several key accomplishments:
— Meeting or surpassing all 17 of CVPS’s service, safety and reliability measures, known as SERVE Standards, agreed upon with state regulators.
— Reaching a four-year contract agreement, the longest in company history, with the International Brotherhood of Electrical Workers Local 300.
— An Institutional Shareholder Services corporate governance rating among the top 8 percent of the S&P 600, a measure Young said “speaks volumes about our integrity, openness and clarity.”
— Complete compliance with Sarbanes-Oxley reporting requirements, and a clean audit opinion.
— Progress by Catamount on eight U.K. wind projects, completion of the second phase of construction at their Sweetwater, Texas, site, and initiation of the 135-megawatt third phase, expected to be completed this year.
— Creation of CVPS Cow Powerà¢â€ž-, the nation’s first renewable energy program to connect customers with the environment and farm generation through a farm-based energy choice. More than 1,500 CVPS customers have enrolled so far.
“Our successes of recent years were borne out of a work ethic among your employees that I believe is unrivaled in the industry,” Young said. “It is their collective strength, their commitment and their earnest resolve that will ensure that CVPS is stable and financially strong in the years ahead, and continues its 75-year tradition of quality service, reliability and environmental stewardship.”