Reporter debrief: GlobalFoundries wants to become its own utility. Is that even allowed?
Back in March, GlobalFoundries, one of the state’s largest employers and biggest consumers of electricity, announced a deal to stop buying electricity from Green Mountain Power and become its own utility. That proposal is now before the Public Utility Commission (PUC), the state body that regulates utilities.
In the months since it was announced, the deal has raised some big questions: How will GlobalFoundries cut its carbon emissions at its Essex Junction plant? Will they be held to the same clean energy standards as other utilities? And does the PUC even have the authority to allow this move?
VPR’s Henry Epp has been reporting on GlobalFoundries' proposal, and he spoke about it with Anna Van Dine on VPR’s daily news podcast, The Frequency.
Anna Van Dine: Ok, so what I know about GlobalFoundries is that they make computer chips and they have a plant in Essex junction. What else do I need to understand?
Henry Epp: Well, they employ over 2,000 people in Vermont, making them the largest private, for-profit company in the state. So they’re a big economic engine here. They took over their Essex Junction plant from IBM back in 2015.
They’re also a really big company beyond Vermont. Global just went public. That means everyday investors can buy and sell their stock. They’re a $30 billion dollar company in a competitive industry, with manufacturing operations in New York, Singapore and Germany.
Got it. And so at this point, why do they want to become their own utility?
It’s about money and staying competitive, really. GlobalFoundries – and their predecessor IBM – has long complained about high electricity costs in Vermont. They say it makes up half their annual operating cost here, and it's twice the cost here as their nearby manufacturing plant in upsate New York.
And so they believe that if they split off from GMP, they can save money by buying their power directly from the grid, like traditional utilities do, rather than going through GMP. And so back in March, they announced this deal, which would allow them to do just that.
How does Green Mountain Power feel about all this?
So, GlobalFoundries is GMP’s biggest customer. In fact, according to GMP, they use more power every year than the entire city of Burlington. So you would think GMP would be opposed to losing them. But GMP is actually on board with Global’s plans.
Well, they say they want to see GlobalFoundries stay in Vermont and continue to be this key part of the economy. So they negotiated a deal with GlobalFoundries, which allows the company to manage all their own electricity needs, and in turn, Global will pay GMP $16 million dollars over several years to offset the impact of their departure on other ratepayers.
GMP spokesperson Kristin Kelly says that if Global were to split off without this deal, there would be a significant impact.
"If Global were to leave without a proposal like this in place, the immediate rate impact for customers could be about 3%," Kelly said.
So, without that $16 million, electricity costs could go up for everyone else.
Ok, so it sounds like Global and GMP are on the same page, and made this deal. But you said at the beginning that some big questions have come up around emissions, standards, and the PUC’s authority over this in the first place. So, can we start with the carbon emissions question?
Yeah, so several environmental groups are really unhappy with this deal. And the main reason they’re objecting to it is GlobalFoundries’ carbon emissions.
As you know, the legislature passed the Global Warming Solutions Act last year, which means Vermont is required by law to reduce its carbon emissions. It has specific goals for 2025, 2030 and 2050. But the Scott administration cut a deal with GlobalFoundries that only includes commitments to emissions reductions through 2025.
Groups like the Conservation Law Foundation see this as the Scott administration creating a loophole for a big multi-national corporation. Elena Mihaly is the group’s Vermont director:
"This is a very wealthy corporation. And it is our responsibility to hold this kind of industry responsible to the climate laws that were universally, very popularly passed in the state."
And how does the state respond to that?
Well, I talked to Peter Walke, the commissioner of the Agency of Natural Resources, and he disagrees that there’s any loophole being created for GlobalFoundries. Because if the company fails to meet their goals, he says his agency can create new regulations to make sure they reduce emissions.
"The reason why I was willing to sign on was because if they don't achieve those results, then we can further pursue further emissions reductions through a standard rulemaking process," Walke said.
All right, so that’s the carbon emissions debate. What about holding Global to the same standards as other utilities. What does that mean?
So, this question centers around whether as its own utility GlobalFoundries would have to abide by Vermont’s requirement that all public utilities get a percentage of their electricity from renewable energy. And here’s where it gets wonky. This Renewable Energy Standard only applies to utilities that sell power to customers. Now, GlobalFoundries wouldn’t have residential customers like you and me. But it does have four tenants to which it leases office and manufacturing space on its Essex campus, and electricity is part of those leases.
Environmental advocates argue that constitutes selling power, and therefore they say Global should have to abide by the state’s renewable energy standard. Here’s Peter Sterling, the head of the industry group Renewable Energy Vermont:
"I don't see why Global Foundries should be exempted from that. There is no compelling reason other than corporate greed for them to ask to be exempted from that requirement."
How does GlobalFoundries respond to that argument?
Well, they say that if they’re considered to be selling electricity, then by that logic every landlord in the state that includes electricity as part of rent would be considered a public utility. So, they dismiss it.
As for their use of renewables, in a statement, the company says if it’s allowed to become its own utility, it will be committed to “developing a carbon free electricity portfolio.” It also says it's already on course to hit the 26% carbon emissions reduction goal by 2025. Basically, they don’t want the state to force them to buy clean energy, they want to do it voluntarily. Environmentalists, however, are skeptical that Global will actually make those changes on their own without state regulation.
OK, two questions down, one to go. You said there’s a question of whether the PUC even has the authority to allow GlobalFoundries to become its own utility. Do they? And if they don’t, who does?
Environmental advocates and even some legislators argue that there’s nothing in state law that allows the PUC to let a company become its own utility, and that the legislature should really take up this issue first.
GlobalFoundries – and GMP – argue the PUC does have jurisdiction, and that they should be able to rule on this. In fact, GlobalFoundries essentially says they could just go about separating themselves from GMP without any state approval if they wanted to. And that would mean no oversight of their electricity use, and nothing to ease the impact on other GMP customers.
So, the PUC is going to deliberate on these issues soon: the jurisdiction question, and whether Global would be selling power to customers. More arguments and details on this case should be coming soon. So, stay tuned.