Vermont Legislature SmartTranscripts:

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: We're live.

[Rep. Kathleen James (Chair)]: All right. Welcome back everybody to House Energy It's Digital Thursday, February 12, we are here with JFO to talk about the FY twenty seven budget, specifically the agency of digital services changes. And so we're learning about this as we prepare to write our letter to house approach. So I'm representative Kathleen James from Manchester.

[Rep. Christopher Morrow (Member)]: Oh, Chris Morrow, Windham, Windsor, Bennington. Michael Southworth, Caledonia too.

[Rep. Christopher Howland (Member)]: Christopher Howland, Rutland, Florida.

[Dara Torre (Committee Clerk)]: Garris Torre, Washington, June. Laura Sibilia, Windham, Dana Lee Perry,

[Rep. Kathleen James (Chair)]: Lisa Gov and JFO. Great. Alright. For the record.

[James Duffy (Director, Joint Fiscal Office)]: For the record, James Duffy, director

[Unidentified JFO Analyst/Testifier]: of fiscal office. And, madam chair, I want to start off my testimony by quickly checking in with the committee and and deferring to you on what is most useful to hear from JFO today. I was here for most of commissioner Gresham's testimony yesterday. I caught up on what happened after I left the room, in the recording. As I understand it, I think the committee may be looking to hear from JFO on kind of our professional assessment of the proposed fiscal year twenty seven changes. So those kind of structural changes that ADS and finance and management have worked together on. And perhaps there may be more specific questions about the f y twenty seven budget once you subtract out those those changes. But I wanted to do a temperature check with you, madam chair. But what's of most interest to you from JFO today?

[Rep. Kathleen James (Chair)]: Well, mostly, I think, you know, as a committee, we really need to weigh in, I think, on what we think about the changes. So we need to make sure we understand the changes. I think most importantly, we need to make sure we understand their potential impact. Right? So, there's a lot of moving of the money around moving stuff to different buckets. And I think our role here is to say, we see that this is happening. We understand why it's happening. Here are the pros, here are the cons, and here's what we think we need to look out for. Like, you know, this part's good,

[Rep. Laura Sibilia (Ranking Member)]: this part we're concerned about. And

[Rep. Kathleen James (Chair)]: how it will impact our job as legislators in providing oversight of IT spending, especially on the big ticket projects. Did

[Rep. Laura Sibilia (Ranking Member)]: I miss anything?

[Rep. Kathleen James (Chair)]: I I Do I need to poke you

[Rep. Laura Sibilia (Ranking Member)]: with one chopstick? You could still I'm not gonna put it.

[Rep. Kathleen James (Chair)]: I right. Yeah. When you put go ahead, Rosa Viella.

[Rep. Laura Sibilia (Ranking Member)]: I think that was perfect, madam chair. I would just put a finer point on something I am hoping to get a better better clarity on, and I'm not sure we had a better clarity on this last year, but it feels very important, which is how much money is the governor proposing this year in the budget for IT projects like CCRIS. You know? So just and that's not something I think that was presented to us in, you know, last year. It does feel like something that's important. So I would just put that as a side to what I think is in the inflamed. Yes. And I will add to

[Rep. Kathleen James (Chair)]: your beautiful thought, which is that it is it is an it is an aside in the sense that it's I I I don't think it's our role and or it's beyond probably the scope of our budget memo to try to find every piece of IT spending across every state agency and department and see whether it's gone up or down and comment on that. However, what Rep. Sibilia is pointing out that's really important is that right now our EPO dashboard, which is a really important oversight tool for us, tracks, here's what it here's what the project is supposed to cost overall. Here's where we are overall. Okay. But it doesn't say, and here's what's in the f y '27 budget for that project this year. And so the reason that's that is important just for us to know maybe going forward for future is we can see from our EPO dashboard how important the Seaways project is. We can see at the 50,000 foot level, wow, it's and I'm I'm now making this up, but wow, this or that project was supposed to cost this, but it's gonna cost that over time. And over five years, it was supposed to take five, but now it's gonna take seven. What we can't see is, wait. In the context of that, how come there's no money for that in

[Rep. Laura Sibilia (Ranking Member)]: the budget this year? Okay?

[Unidentified JFO Analyst/Testifier]: Yes. Absolutely. So I I hear both of those of those concerns. So one is how can you all get the information you need and make sure you have the information you need to comment on these proposed structural reforms in FY '27? Additionally, getting a handle on funds proposed in FY '27 from from major IV projects. Okay.

[Rep. Laura Sibilia (Ranking Member)]: That is it.

[Unidentified JFO Analyst/Testifier]: Great. I can say I'm well prepared to speak to the first category today, representative Sibilia. I would want to do a little more digging into the FY twenty seven gov rec before I provide anything in testimony on that. What I can say is, there aren't as many one times proposed one time expenditures in the FY twenty seven budget as that we've seen in recent years. I'm not aware of any major you know, on the scale of the IT modernization fund, for example, any major new one time proposals, related to tech, IT upgrade projects. Now, see, there aren't any, but I I'm not remembering any off the top of my head. There are things within departmental basis, right, and and prior year corporations continuing execution of projects from prior year corporations that I'm sure would be of interest to you.

[Rep. Kathleen James (Chair)]: So And perhaps also in

[Unidentified JFO Analyst/Testifier]: the the FY '27 basis. Excuse me.

[Rep. Laura Sibilia (Ranking Member)]: I would just note since the formation of ADS, which I strongly supported, I have been asking every subsequent secretary about a sustainable funding mechanism for IT. And were it not for, you know, COVID and all of the other tragic things that have befallen us and the federal dollars that came, I cannot imagine where our IT would be now. And so I think we, as the legislature, have an obligation to understand what we are prioritizing in terms of modernizing our IT. I personally do not think that that is a one time when we get a chance. I think we have to have a funding plan, which is So we're far away from, but this information would be helpful to us.

[Rep. Kathleen James (Chair)]: And on that note

[Unidentified JFO Analyst/Testifier]: Great. Well, what I can tell you all as a top line is that the Joint Fiscal Office has met with finance and management. We've spoken with agency of administration. We've spoken with ADS as well and and been, you know, tuning into their testimony to various committees jurisdiction. The changes that are being proposed for fiscal year twenty seven are credible to joint fiscal and make sense to us from the perspective of bringing deficits within the CIT fund, within the ADS funding mechanisms under control. We recognize I recognize that it is it it's a lot. It it's kind of a thicket to work through, but I'm happy to go through each of them individually today and each of them individually, in our conversations, joint fiscal conversations with the administration. They they make sense as and you all heard from commissioner Gresham yesterday as forms of more precise, more, more clarity in

[Rep. R. Scott Campbell (Vice Chair)]: the financial controls that are applied to the administration of of kind of these routine IT functions across the government. So if I understood commissioner Gresham's testimony and

[Rep. Christopher Morrow (Member)]: that that fund has been getting a roughly $10,000,000 hit for three or four or five years in a row. Right? So and we didn't seem to get much clarity on what that $10,000,000 consists of. We we asked a few times in different ways, and it it troubled me that there was this lack of clarity in our systems that, you know, we couldn't identify $10,000,000 annually. Like, this is now if this was $10,000, I might not be concerned, but there was no real information on what that 10,000 $10,000,000 consisted of year after year after year. Do do you

[Unidentified JFO Analyst/Testifier]: have any more insight into that than than we got yesterday? Representative, I'm afraid I do not. You know, commissioner aggression, ADS, I know they've been working hard on this, and they are starting to pull apart the strings to get a clearer picture. From joint fiscal offices point of view, we speak with them and we corroborate what, you know, the information they share to the extent we can. They have the best visibility into their own systems out of anybody in state government. And so I I cannot offer more clarity on on the deficit drivers in the CIT fund beyond, you know, what the the best postulates out of the executive branch are. I wish I could point you, but I I I know the information that has been highlighted and then, like, the most probable deficit drivers have been highlighted by the administration. I agree that those make sense. There are a couple. Right? Not billing for work that the agency is doing. Right? Not having work that the agency is performing incorporated within the core enterprise services. A conversation about the rates at which ADF professionals bill out their time is certainly another piece of the puzzle. Accurately accounting for the hours that they spend on different tasks and making sure that they're billing both for all the hours that they perform as well as getting adequately compensated to bill for those costs. I think the universe is is fairly there there are good ideas as to what the universe of deficit drivers are. I I can't say definitively with any

[Rep. R. Scott Campbell (Vice Chair)]: more clarity than than by the financial gap. Okay. On that specific point, the specific point about the hourly rate, why is that rate seems to be seem to be further than Lambert? Why why has that not been able to be adjusted with inflation? It's been the same rate, and I understand it for, I don't know, a long time. My understanding is that the rates are about six to eight years old. I can't say why why they haven't been changed. I'm not in a position to speak to that. I

[Unidentified JFO Analyst/Testifier]: can tell you that ultimately, what what I've been told by in conversations with the finance and management is ultimately rate setting authority rests with the agency administration. I know finance and management also plays a key role in facilitating communication, right, between the agency administration and ADS, but I I can't speak to why

[Rep. R. Scott Campbell (Vice Chair)]: the rates haven't been adjusted. It's an administrative rules, correct, to make

[Unidentified JFO Analyst/Testifier]: that adjustment. That's correct. That authority rests within the within the executive branch. My understanding is specifically it's with the agency of administration. Okay.

[Rep. Christopher Howland (Member)]: Well, I think

[Rep. Laura Sibilia (Ranking Member)]: that's That's the answer. Rutland?

[Rep. Christopher Morrow (Member)]: All we have here. Would you say that the the IT systems of finance and management are robust enough to give proper clarity and ability to manage state funds.

[Rep. R. Scott Campbell (Vice Chair)]: I'll just leave it there. That that's a that's

[Unidentified JFO Analyst/Testifier]: a big question. And, yeah, I mean, I I I wouldn't want to say that, but I would say finance management does very good job. I I haven't worked in their systems myself, but I don't feel like I'm in a position to comment on the on the quality of of their internal controls. But I say would we are on a pretty tight ship in Vermont. Right? We have a balanced budget each year. There are problem areas like the IT fund, but, you know, Joint Fiscal works closely with finance and management, and

[Rep. R. Scott Campbell (Vice Chair)]: we get the information that we need from them reliably. And thank you.

[Rep. Kathleen James (Chair)]: Did you have, like are we just totally interrupting you? Have we dragged you out the drive?

[Unidentified JFO Analyst/Testifier]: A little bit, but that's okay.

[Rep. Laura Sibilia (Ranking Member)]: Yeah. Let's let's go forward. Sure. Okay.

[Unidentified JFO Analyst/Testifier]: So I wanted to see if there will be any utility for our conversation today talking about internal service funds in more general sense before we dive into some of the changes being made between internal service funds.

[Rep. Kathleen James (Chair)]: Yeah. Let's let's do that. We're we've got until 10:45. So

[Unidentified JFO Analyst/Testifier]: Okay. Okay. That's good. So internal service funds, you heard from commissioner Gresham two days ago. These are funds within state government that support entities that might not serve the public directly, but they service the agencies that do serve the public directly. Right? So human resources, integral part of the operations of state government. It's mostly on the back end things. Right? It it serves departments and agencies. Same with IT. The provision of IT services is something that enables the work of the other public facing agencies and departments that the public doesn't necessarily have front end exposure to. Internal service funds are one of the ways that state governments fund that work. They allow for the spreading of costs for those functions, for human resources, for example, for building space, for IT across the various components of state government. They do this by billing back to the respective agencies and departments. Right? So every year, ADS sends a bill to Agency of Natural Resources, Agency of Administration, what have you. Those agencies then pay the bill to support the work that ABS does to administer IT and state government. This brings us to the idea of duplicated spending authority, which I know it always raises haples because it sounds like we're spending money twice. We're not. The way an internal service fund appears in the state budget and if you ever noticed at the bottom of the state budget where you see the grand total, right, like, maybe our total state budget is 9.3, but the the duplicated state budget is something like 15. I'm just making up numbers. But the duplicated state budget, the total budget is often larger than the unduplicated budget. That's because the way we track the way money moves through internal service funds is first, the spending authority is given to the agency that they were able to stick with agency digital services. Spending authority is given to the agency of digital services. Right? Agency of digital services, you're authorized to collect this much money from the various agencies and departments this year based on what we think you're gonna have to do for them, the costs you're going to incur in serving those agencies. Then that amount is nested within the base budgets of all those other agencies. So when ANR presents its budget to house appropriations, included in their budget is what they're gonna have to pay to ADS for IT services that year. ADS also has their own separate item in the budgets that we can all have visibility into how much money they're going to spend. But the ADS budget, it really I mean, 90% of it and more than 90 consists of the agents the money they receive from other agencies and departments. I'll stop. Yeah.

[Rep. Kathleen James (Chair)]: So in the budget, the same number appears twice. But for EDS, it's it's spending authority. And for the agency, it's this is how much money you have to pay the bill?

[Unidentified JFO Analyst/Testifier]: It's spending authority for everybody. When we're talking about appropriation, we're always talking about spending authority. We're not really talking about actual, you know, dollars moving between accounts. You know, it's authority to expend money for a given purpose. But we can give dual spending authority to both ADS and the agency that's paying for ADS's services.

[Rep. Kathleen James (Chair)]: Okay. So it's not the taking away what I said about the actual money. It's it the same the spending authority for the same amount is gonna show up at ADS and, like, a and r. I I mean Yeah.

[Unidentified JFO Analyst/Testifier]: Let's say you for example, if you wanted to add up all of the ADS expenditures across all the departments and agencies for fiscal year twenty seven, that would roughly equal the balance of the CIT funds. Right? Or well, I'm getting ahead of myself. But that would roughly equal the spending authority given to ADS in their internal service fund that year. Right? The sum of all IT expenditures to ADS for a given year is equal to the spending authority that ADS has for that given year.

[Rep. Laura Sibilia (Ranking Member)]: K. Yes. Can you help me understand the dual spending authority? Yes.

[Unidentified JFO Analyst/Testifier]: All it really means is

[Rep. Laura Sibilia (Ranking Member)]: Why we had it and why it's going why it should always.

[Unidentified JFO Analyst/Testifier]: So dual spending authority is not going away. It's not going away under the f y twenty seven proposal. There are some changes I'll get to. We're going to, for example, increase the amount of internal service funds that ADS uses to administer their work. I think there are good reasons for that. But those also represent dual spending authority. And this is a common way of conducting business and state government. Right? In no way is Vermont the minority, right, in state governments for running their IT department this way. To answer your question about why it's done this way, it's a cost accounting mechanism that allows to us to spread IT costs rationally across state government. Maybe we want some things to be paid for roughly equally by every department and agency. Other things, it makes more sense for an agency to just be the only payer because they're the only user of that component. Having an internal service fund allows us to have a more informed, rational conversation about how we distribute those costs.

[Rep. Laura Sibilia (Ranking Member)]: Okay. And so I heard you say it's not going away, but I don't think that's what it's not what we heard yesterday, what commissioner Gresham said.

[Unidentified JFO Analyst/Testifier]: I may I ask a follow-up question, Sharon, just

[Rep. Kathleen James (Chair)]: to Oh, yeah.

[Rep. R. Scott Campbell (Vice Chair)]: Question. Sure.

[Unidentified JFO Analyst/Testifier]: From your conversation with both commissioner Gresham, what what is your understanding of what's going away in the f y '27

[Rep. Laura Sibilia (Ranking Member)]: I am, I will tell you that I am quite I'm gonna be

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: very careful here. I'm gonna tell you that I'm not really clear.

[Rep. R. Scott Campbell (Vice Chair)]: Okay.

[Rep. Laura Sibilia (Ranking Member)]: And I'm trying to understand. And I found that to be confusing, which is why I'm asking you about it. And I'm trying to visualize this in my head, like, what's happening here so that I can make sense of that. Spreading costs across is very helpful, but the I still can't make sense of what commissioner Rutland said.

[Rep. Kathleen James (Chair)]: I have a thought. Can I say what I think? Because what if I what if I'm right? Oh my god. This construct of dual spending authority showing up

[Rep. Laura Sibilia (Ranking Member)]: in two places Mhmm. That is not going away.

[Rep. Kathleen James (Chair)]: What is changing is who has the final say and who pays the bill.

[Rep. R. Scott Campbell (Vice Chair)]: I think what we're circling here

[Rep. Kathleen James (Chair)]: Are we getting

[Unidentified JFO Analyst/Testifier]: is this specific change to bespoke, the bespoke build act mechanism Correct. Which is part of the changes one of, one of the changes being made, but there are others. And I think what might be most helpful is the next thing I wanted to discuss

[Rep. Kathleen James (Chair)]: keep going. Yeah.

[Rep. R. Scott Campbell (Vice Chair)]: Were the changes to

[Unidentified JFO Analyst/Testifier]: the internal service fund structure. I think this this will be helpful.

[Rep. Kathleen James (Chair)]: Because we might just be getting hung up. To me, who decides who pays the bill? Why it's spending authority. So we might be mixing up

[Rep. R. Scott Campbell (Vice Chair)]: And and and I think it's a matter of definitions too.

[Rep. Kathleen James (Chair)]: I think so too. Okay. We need to stop

[Unidentified JFO Analyst/Testifier]: I hear your question. I'm going I'm going I'm I'm going to get there. We're going to endeavor to to get there. Yeah. So currently, we we just covered what internal service funds are, how they work. Currently, there is just one internal service fund that pays for ADS's work. That is the Communications and Information Technology Fund, CIT Fund. You all may remember that ADS uses different mechanisms of billing agencies for the work that they do. One is core enterprise services. That is where you divide all of these shared foundational IT expenses equally roughly based on headcount across all of the state government. There are others that are based on demand. So instead of being spread equally across state government, what agencies are billed is based on how much they consume. This is where we start to talk about things like service level agreement, SLA, time sheets, telephony, other bespoke, all of which you you've heard. Those are individual components under demand based billing. Currently, all of those build back mechanisms ultimately route money back to the CIT fund. It's the one internal service fund utilized by ADS. One change being proposed in f y twenty seven is that rather than having one internal service fund, the CIT fund, ADS will instead administer four. And each of those four internal service funds will be specifically for what's currently a build back mechanism. Right? So there will be an internal service fund for CES. That will be the CIT fund. There will be an internal service fund for SLA, an internal service fund for bespoke, and an internal service fund for, I apologize, one is escaping me, Bespoke, SLA, and timesheet. So there will now

[Rep. R. Scott Campbell (Vice Chair)]: be four instead of one. They all have different names now. They do. I'm I'm making a deliberate so you

[Unidentified JFO Analyst/Testifier]: cannot use their new names just for the time being. And the reason behind that change and I think when I first saw this, thought, woah. Why are we increasing the number of funds? It seems like we're increasing the level of complexity in a system that's already complex. Why would you multiply the internal service funds you're using to support ADS's work? I understand it now, and I it makes sense to me. As it is now, there are different build back mechanisms that route money to the internal service fund, And each of those bill back mechanisms might have its own specific set of problems, right, might be contributing to these deficits or this underbilling at ADS in its own unique way. And they are separable. Right? The bill back mechanisms, the money that ADS receives is separable by the bill back mechanisms. But it's not always super visible to you all as legislators or even to JFO. Anybody external to ADS, it's not immediately clear how much money was collected via these different bill back mechanisms in a given year under the current system. ADS can tell us, but we go to them. We ask them to provide that information. It's not immediately clear. When we have separate internal service funds, each of which are just receiving a funding stream that represents a different build back mechanism, now that's a new level of visibility. I, JFO, you all, I, on behalf of you all, can much more easily look at the operating statement for a specific internal service fund and say, oh, okay. There's a cash flow problem in just randomly in the time sheet internal service fund, but not as much of a cash flow problem or no cash flow problem in this other one. And so it allows me to zero in on a specific build back mechanism and separate the I think the the, metaphor that Richard Gretchen was using two days ago was the funny colors in the pool. Right? Mhmm. If I'm trying to figure out, like, which build back mechanism is contributing red and which one is contributing blue and which one is contributing green to the pool, much easier to do if I have any different internal service funds to look at as opposed to these build back mechanisms all nested within one internal service. Is that that clear enough?

[Rep. Kathleen James (Chair)]: Yes. No. It is clear enough. It is clear enough.

[Unidentified JFO Analyst/Testifier]: So that is the first change. And I address that one first because it flows kinda naturally from our previous conversation about how internal service funds work. I'm going to step away from that conversation from that topic and move on to, I think, the next change that's of most interest to you all, which is the new general fund appropriation.

[Rep. Kathleen James (Chair)]: Yes.

[Unidentified JFO Analyst/Testifier]: That sounds good to you, madam chair.

[Rep. Laura Sibilia (Ranking Member)]: Yes, please.

[Unidentified JFO Analyst/Testifier]: So currently, ADS is almost entirely a bill back funded agency. I think they have about a $230,000 general fund appropriation every year to fund the Vermont Center for Geographic Information Studies. But for a long time, that's been the only general fund appropriation that supports work at ADS. However, we know that there are issues with the build back mechanisms that ADS uses. Specifically, they're not collecting enough money to cover the work that they're doing through these build back mechanisms. Part of the reason for that is ABS is increasingly taking on roles that aren't easily divisible among different units of state government. You heard about some of these already from commissioner Gresham. Cybersecurity. Every year, they're ever increasing demands, to maintain compliance with cybersecurity requirements and cybersecurity best practices. Data governance, data storage, or maybe not data storage, it's maybe more SLA. AI, you know, ABS is increasingly getting involved with helping to develop policies and governance structures for the use of AI across state government. Similar to CES, core enterprise services, those are costs that aren't maybe well, neither not easily allocable to individual entities. Doesn't make sense to build that one specific agency or even to spread that cost evenly across all the agencies. So the proposal for f one twenty seven is that going forward, ADS will receive a nine for this year, it's supposed to be a $9,080,000 increase in their general fund appropriation to cover that

[Rep. R. Scott Campbell (Vice Chair)]: kind of work. And that's expected to

[Unidentified JFO Analyst/Testifier]: be recurring general fund appropriation going into the future. And so you'll see this in the budget documents as a $9,080,000 or $9,080,000 increase for f y twenty seven. The total general fund appropriation to ADS will be something like 9,300,000.0. Right? Because you're taking that little pot of money for the GIS center and this 9,000,000 for these other costs. Currently, what you'll hear from ADS and finance and management is that these are costs that just aren't being recovered, which is one of the drivers behind deficits in the CIT fund, and that that's looking to be addressed through the changes proposed in FY 2017. So pro of that is currently there's work that ADS is doing that's just not getting paid for, and that contributes to the CIT fund deficits. Not a great way fiscally to run a state agency. Right? We wanna have visibility into all the costs we're incurring. We want to be paying for those costs actually. I think one

[Rep. R. Scott Campbell (Vice Chair)]: drawback or one con

[Unidentified JFO Analyst/Testifier]: or just a a trade off rather to highlight for you all about that is that we're now introducing a new recurring $9,000,000 pressure on the general fund going into future fiscal years beginning at f y twenty seven. Now I think there are good reasons for you all to consider doing that, but it does represent a new pressure on the general fund.

[Rep. Kathleen James (Chair)]: That's helpful too. So that that's just new money. It's a new base appropriation. It wasn't shifted from somewhere else.

[Unidentified JFO Analyst/Testifier]: Nope. This is new. And so this brings ADS from a 99% build back funded agency to a 90% build back funded agency with about 10% of their costs now being covered by recurring general fund appropriation. And just to be crystal clear, ADS has always been more or less funded by the general fund because you start in the general fund, the money goes to the agencies, and then it goes to ADS to pay for the work. So, you know, to be just put the finest point on it, they've always been general fund funded. But now you're we're talking about Direct

[Rep. Laura Sibilia (Ranking Member)]: based direct general fund appropriation for ADS.

[Rep. Kathleen James (Chair)]: Here's your money for

[Rep. Laura Sibilia (Ranking Member)]: the work that you're not you haven't been able to charge for. Essentially. Mhmm.

[Rep. Kathleen James (Chair)]: Like, we're really making progress. Let's keep going.

[Unidentified JFO Analyst/Testifier]: So glad to hear

[Rep. Laura Sibilia (Ranking Member)]: that. Yeah. Yes.

[Unidentified JFO Analyst/Testifier]: And so that represents a new pressure on the general fund. Additionally, while we're on the topic of well, let me pivot to a different topic rather. We've talked about the division of the CIT fund into four internal service funds total. We've talked about the new $9,000,000 general fund recurring appropriation, direct appropriation. I also wanna talk about a change occurring within core enterprise solutions, core enterprise services rather, CES. I wanna do this one next because I think CES, if I'm reading the room right, we have a good grasp of CES. These are the, you know, foundational costs. We spread them out on a headcount basis across state government, more or less. There are changes occurring within the CES calculation methodology proposed for FY '27. And let me figure out how I want to frame this. The end result of that is a greater the CES is increasing as a share of the build back mechanisms of, like, how AES recoups its money. Currently, Core Enterprise Services uses a headcount basis for billing agencies. Right? You got a 100 people. We're gonna charge you whatever we think the divisible cost of Core Enterprise Services is. We're gonna charge you that times a 100. What you heard a little bit from commissioner aggression about two days ago is that there's now increasing recognition that there are really different tiers of core service usage among people within state government. And the whole idea about core enterprise services in the first place was that it would, you know, increase fairness and rationality in how we distribute costs among state government, and it does that by doing it more or less equally. But then you have folks like Park Rangers at FPR, you have corrections officers at DOC whose usage of many core IT functions is at a lower intensity than folks who are doing, you know, intense financial modeling at DFR or someone like me who sits all day at my desk and does lots of spreadsheeting and all that kind of thing. You have folks who might spend most of their day outside or not at their desk who really just need an email address, and some login credentials for VTHR, that kind of thing. Does it make sense for my CDS cost to be the same as someone, like, as a a game warden or a correctional officer? Probably not. And so ADS finds the management of the administration is proposing in f y twenty seven to move from a headcount basis for core enterprise services to a user count basis. And what that means is user count will, there will still be, like, the lowest tier, like, the base tier that's kind of currently already used for CES costs and a higher tier where an agency is paying more for that person because that person is higher utilization of those core services. And I I don't have the number Two tiers? Two tiers. Yeah. Yeah. Currently, there's just one. It's headcount based. Now there's going to be two. It's user account based. I don't believe I have in my notes what those rates are, like, per person, but that's the core of what they're changing within the CDS methodology and what they're proposing to change in FY '27.

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: Okay.

[Unidentified JFO Analyst/Testifier]: Another thing that should help hopefully help ADS more accurately, more wholesomely recover costs, that they're incurring. Right? And to spread costs out more rationally across different folks to take over. I'm sure any any questions or pause, Simona? No. That's forged. Okay. Additionally, within CES, finance and management ADS are proposing to continue moving costs currently under SLA into CES. You all remember this from last year when an appropriation of $15,000,000 was made to help move costs from SLA, that billing and arrears credit card build back mechanism to core enterprise services. My understanding is that work is continuing this year, and those are the two reasons that you see CES growing as a share of ABS cost recovery. They're changing the the methodology a bit with the user count piece, and they're continuing to move costs from SLA to CES. So you're seeing SLA go down, I believe, by 6,000,000 or so this year, and you're seeing CES go up.

[Rep. Kathleen James (Chair)]: By the same amount?

[Rep. Laura Sibilia (Ranking Member)]: No. No. No.

[Unidentified JFO Analyst/Testifier]: I which which was my question too. Was like, oh, so it should be one to one. It's I don't believe it's a one to one change. I think actually the increase in CES is greater than the corresponding decrease in SLA. Part of that is changes being made to the methodology. Part of it may also be related to more accurately capturing services that are not currently being billed for. I'm not 100% sure on the specifics there, but to answer your question, no. It's not a one to one increase decrease between SLA and CES. K.

[Rep. R. Scott Campbell (Vice Chair)]: Yep. CES is also an internal service fund.

[Unidentified JFO Analyst/Testifier]: Under the current status quo, it's one of the build back mechanisms within the single service internal service fund that ADS uses. Right? CIT. Exactly. The the CIT fund under the

[Rep. R. Scott Campbell (Vice Chair)]: So what is going to be called CIT?

[Unidentified JFO Analyst/Testifier]: What is that? Fund will continue to exist. What's left in CIT? It will be the home for core enterprise services. Oh,

[Rep. R. Scott Campbell (Vice Chair)]: is it what else is there besides core besides core enterprise?

[Unidentified JFO Analyst/Testifier]: So and, again, I'm sticking to the old names just to avoid unnecessary confusion, but there's SLA, right, which service level agreements.

[Rep. Kathleen James (Chair)]: No. That's right. That's right. We saw that yesterday.

[Unidentified JFO Analyst/Testifier]: Yep. That is that billing in arrears for, you know, hardware or software, that kind

[Rep. R. Scott Campbell (Vice Chair)]: of thing, build back mechanism. So my notes yesterday, which came along, indicated that Enterprise Offerings Fund was formerly SLA. Is that correct? I believe that's correct. Yeah. Enterprise offerings fund is the new name for SLA. That's right. And I

[Unidentified JFO Analyst/Testifier]: I I'm deliberately using the old names, but so what confusion? But I think I'm just creating confusion.

[Rep. R. Scott Campbell (Vice Chair)]: No. No. No. That's fine. But but but what I'm confused about is you're saying that CES, which is indicated as a separate fund, and I'm getting commissioner aggression's slide from yesterday, which includes $45,000,000.09 of it is general fund and 36 of it is CIT. That's separate from his listing about enterprise offerings fund, which is formerly SLA. So you just said, I think that SLA was included in TES core enterprise services.

[Rep. Kathleen James (Chair)]: I agree.

[Unidentified JFO Analyst/Testifier]: If I if I did, that was that was not my intention. So currently, the proposal is there will be four four internal service funds instead of one, each of which will be the new home for each of those individual build back mechanisms. And CIT fund will be the home just for c e for, CES. The professional resourcing fund will be the home for what we currently call SLA or Timesheet.

[Rep. R. Scott Campbell (Vice Chair)]: Professional resourcing is kind of

[Unidentified JFO Analyst/Testifier]: Oh, you're right.

[Rep. R. Scott Campbell (Vice Chair)]: Enterprise offerings is SLA.

[Unidentified JFO Analyst/Testifier]: You're you're correct.

[Rep. R. Scott Campbell (Vice Chair)]: Yep. That time services is was bespoke. That's good. Yeah. So what's left in CES? Correct.

[Unidentified JFO Analyst/Testifier]: What's left in CES is what's currently in CES. So it's foundational, equally spread across state government costs like, you know, domains, yeah, the Internet, yeah, basic Internet activity, that kind of thing. And cybersecurity is another another piece of that. Got it. Yes. So the CE and then there's or some changes to the underlying methodology of how the CES per headcount cost is is calculated are changing. But CES is, I want to say, relatively untouched that they're tinkering with it, but it's the same conceptual idea,

[Rep. R. Scott Campbell (Vice Chair)]: and it's remaining within the CIT fund. Basic IT services, everybody in Sticko Correct. At one level or another at at either basic tier or whatever the what's the higher tier called? Is there a tier is there a name for it? There might be. I I I do not have it. You didn't say it. That's fine. Don't have it me. Yeah. That's fine. Cool. Okay.

[Rep. Kathleen James (Chair)]: And I'm not sure how much we'd need to understand the g g names.

[Rep. R. Scott Campbell (Vice Chair)]: No. No. We don't. I it's

[Rep. Laura Sibilia (Ranking Member)]: a thought you may you might

[Rep. R. Scott Campbell (Vice Chair)]: have mentioned it. That's all. Because I'm writing down How are

[Rep. Kathleen James (Chair)]: we doing on time check?

[Unidentified JFO Analyst/Testifier]: We have until 10:45?

[Rep. Kathleen James (Chair)]: We do. And, Lisa, are you gonna be because we wanted to talk to you about standards and stuff. Right? Yes. Okay. So

[Unidentified JFO Analyst/Testifier]: Okay. I think now we can I want we should talk about the changes to Bespoke?

[Rep. Kathleen James (Chair)]: Yes.

[Unidentified JFO Analyst/Testifier]: I know that that's a topic that's of interest. I'm just making sure in my notes yeah. So we've discussed the major changes I wanted to get to with the exception of Bespoke. So let's talk about that.

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: K.

[Unidentified JFO Analyst/Testifier]: So Bespoke is one of the build back mechanisms currently utilized by ADS. It encompasses many of the large scale IT projects that you all are interested in. It represents a way for ADS under the current status quo to bill agencies for its work for large scale projects, putting together bids, putting projects out to bid, managing contracts for the large scale, one time, customized projects. Two changes happening in that, perhaps more, but I'll go through them one by one. Internal service fund is being established to house bespoke. Right? That's going to be called the customized services fund. We've already talked about that. Additionally, the vast majority of costs currently encompassed in Bespoke are being moved outside of ADS's spending authority and out to the

[Rep. R. Scott Campbell (Vice Chair)]: sponsoring agencies. So instead of the spending authority for I'm

[Unidentified JFO Analyst/Testifier]: trying to think of that theoretical example. I I shouldn't speculate. But instead instead of having the spending let's see if a $15,000,000 IT upgrade. In the past, $15,000,000 spending authority would have lived with ADS through the bespoke build out mechanism. Under the proposed changes, now, let's say, AHS is the sponsoring agency. That $15,000,000 spending authority will live with AHS. ADS will still perform all of the contract management, project management, bidding, you know, the the professional services of managing a large IT project will continue to live with ABS. They'll continue to provide that professional service, but the actual act of paying the bills to the vendors for that project will now live with the sponsoring agencies. So in this native example, it would be AHS. Yes.

[Rep. Laura Sibilia (Ranking Member)]: Yes. Uh-huh. So is this changing budgets? Either ADS or the agencies and departments? As

[Unidentified JFO Analyst/Testifier]: a result of this change, you're seeing ADS's total budget go down by, I want to say, about $4,445,000,000 this

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: year. $4,747,000,000.

[Unidentified JFO Analyst/Testifier]: That expenditure so to answer your question, yes. It is changing budget. It's not changing the amount of money that's spent across the government, but it is moving significant amount of money, 47,000,000 from ADS to these projects sponsoring agencies. So is it increasing the sponsor budgets? Yes. This is a one to one. You you you this unlike the the previous example. Right? This would be a one to one change. You're taking Just wanna say, I'm just gonna make an ADS

[Rep. Laura Sibilia (Ranking Member)]: testimony. This is

[Rep. Kathleen James (Chair)]: this is a transformational

[Unidentified JFO Analyst/Testifier]: I'm sure ADS is is listening, and I'm probably getting some of the finer points wrong, but I I'm this is I'm glad it's helpful, this is

[Rep. R. Scott Campbell (Vice Chair)]: Well, I was taking it out of the duplicate authority situation and putting it into a sync authority situation. Yeah.

[Unidentified JFO Analyst/Testifier]: There's still I would say there's still a dual role to be played. A dual role.

[Rep. R. Scott Campbell (Vice Chair)]: Yeah. But but the spending authority is Presumably is now only with the agency, not with AES. Correct.

[Unidentified JFO Analyst/Testifier]: The spending authority for a big IT project would now be with whatever agency is undertaking that project. Yep.

[Rep. Laura Sibilia (Ranking Member)]: Rip, Torre? Yeah. Just a quick question for you. So the project management role that ADS still serves is gonna be in the CES, not

[Rep. R. Scott Campbell (Vice Chair)]: in the I listened

[Unidentified JFO Analyst/Testifier]: to commissioner Gresham's testimony after I left the room two days ago, and I heard his testimony to that fact that some of these professional services for project management would be billed out through CES. There I I I have some questions as well about, like, how that is billed for because I could see it foreseeably being rationally attributed to maybe it's anyway, my understanding from from Chris Regression's testimony is that core enterprise services will absorb many of those project management costs. I don't know if it's 100% of those project management costs or not, but the expectation from from commissioner Gresham's testimony is it will be a CES cost.

[Rep. Kathleen James (Chair)]: For Southworth?

[Rep. Michael "Mike" Southworth (Member)]: So trying to make it a little

[Rep. Laura Sibilia (Ranking Member)]: clearer, it's changing the financial responsibility for that money, but not changing the oversight of the project.

[Unidentified JFO Analyst/Testifier]: I'm hesitant to say that there will be no oversight function performed by the sponsoring agencies because, you know, as the agency that's doing it on it, but But, yes. That's true. ADS ADS will be providing their own unique kind of IT professional perspective on overseeing the project, managing it, and the actual act of paying the bill to the vendors goes to the sponsoring agency. Yep. I'm going I'm just gonna make quick eye contact with Lisa Gobin, our IT consultant in the room, because Lisa has some expertise in project management that I don't I don't know if there's anything you wanna add that.

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: In in what I'm going to talk to them about, I I cut that.

[Rep. R. Scott Campbell (Vice Chair)]: Okay.

[Rep. Kathleen James (Chair)]: Alright. Let's make sure it

[Unidentified JFO Analyst/Testifier]: It's 10:37. Yeah.

[Rep. R. Scott Campbell (Vice Chair)]: I I think you probably heard enough from me. Wanna leave enough time for

[Unidentified JFO Analyst/Testifier]: for Lisa to testify.

[Rep. Kathleen James (Chair)]: That was super helpful.

[Unidentified JFO Analyst/Testifier]: Thank Good. And I will be in touch too about any additional follow-up infographics written testimony that might be helpful to you all.

[Rep. Kathleen James (Chair)]: Written testimony, I I hate to ask, but it it is so helpful. We refer to it later.

[Rep. R. Scott Campbell (Vice Chair)]: I completely understand.

[Rep. Kathleen James (Chair)]: And it's great to just keep a paper trail of our conversations and our work.

[Unidentified JFO Analyst/Testifier]: Absolutely. So I will work on getting you something right after

[Rep. Kathleen James (Chair)]: Thank you so much. Alright. Lisa. Okay. For

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: the record, Lisa Gobin, contractor with JFO, the IP. So what I wanna talk to you about are the implications of the changes mainly around the bespoke piece of the the movement of the oversight of the spoke dollars, the authority of the spoke dollars back to the agency. The first thing I want to talk about was just the standards. I know when this came up, there was concern whether or not this would result in lack of involvement of ADS and decisions on specifically how a project is managed, what deliverables are paid for, etcetera. So and I I had a convert I had an email conversation with Stacy, the head of the Enterprise Project Management Office, to confirm my understanding. The project management standards that are used by ADS include standards for deliverable acceptance, as well as all areas of a project. So when a project starts, all of the key business leads, IT leads across a project are identified. And as you work through the project and their involvement of the project, they're depending on what the deliverable is. If it's a deliverable that relates to business requirements, the business lead always signs up on the deliverable. So how it typically works is the project manager thinks, hey, I think a deliverable has been met. They take the deliverable. They actually have a paper trail. They go to a business person, the business lead usually, and say, hey. Do you agree that this has been met? They look at it and they're like, yeah. We did the testing. Everything's clear. I'm gonna sign off on it. If there's a technical component, they go to the tech the appropriate technical lead that can sign off on that. They actually get a sign off. And then also depending on the size of the project, you may have the sponsor, which could be secretary Riley Hughes or a a commissioner of an agency also sign off at Liverpool. I remember doing this when I was in state. So I remember walking into the CFO's office, sitting down and talking about deliverables and how they've been met, and then would sign off on it. I mean, the bill gets paid. So I don't see any changes for how the projects who who eventually is paying the bill impacting the standards on how it is. And this is whether it's a project that's managed by an employee of ADS and the project management office, or if it's a contract, or if it's one of these projects that now had is was moved with the disposed projects where they've moved back to the agency. I don't see any changes in the standards for acceptance for this at all. So I don't see a risk there. Around oversight, there were some concerns, you know, could this impact the availability of information on the dashboard? And I did speak to John Kelly about this and that was one of his concerns. But then, you know, I had kind of one of those wait a minute moments where I went back to the dashboard and looked what as far as the finance financial information. What's tracked on the dashboard is the initial estimate of the implementation cost when it's in the planning stage, and then the current estimate. So that's after, you you might have it either when the implementation phase begins, where we we start to track some of those projects. It's updated and it's possible later on if there's change orders which are run by the project manager that have dollar amounts, that amount could be increased. But the dashboard doesn't track how much has been paid on the invoices. So it's really tracking estimates, the budget, not the expenditures. So I don't see any impact on the dashboard based on this change. And I I also I tend to when I'm for the projects that I'm Yeah. You know, I'm observing, that I review, I typically keep track of the change orders just from time to time. I'll ask the project manager, can you send

[Rep. Laura Sibilia (Ranking Member)]: me any change orders that I

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: haven't executed? That sort of thing. But I'm not routinely updated with expenditures. I watch the project plan, are deliverables being met, are we on track, that sort of thing. So I don't see any changes in terms of the information available to oversight through the dashboard. Around what we might get out of this change. When I first heard about this change, I it seemed more like a internal Vermont oversight decision, you know, that within the executive branch. But I I also think it could be an opportunity. When commissioner Gretchen was here, he mentioned that he would be talking with his staff about changes to the chart of accounts that could really help them track IT projects really deliberately. It might be worth considering sending a letter to commissioner aggression reiterating that request, but also asking if there's a way at the same time they could try and track associated direct business cost projects. Because that's something that we typically haven't received from ADS. So that would be, you know, the cost of, like, the on the ERP project. They have the business process reengineering contractor that's being paid directly by AOA, and ADS considers that a business expense, but I included it in my review and my budget as a cost. It would be great if we have could have a more systematic way of tracking that information. And I've also heard from leaders across different agencies in the state when I talked to them about projects saying, wow. It'd be great if we knew business cost because those aren't tracked as part of project cost too. So it might be an opportunity not to not only are we not losing anything from the dashboard, but maybe it's an opportunity to improve the way reporting is done. So so that, you know, if if you are interested in doing that and you would like some language, perhaps to include that request, just let me know.

[Rep. Kathleen James (Chair)]: I was just thinking that. Okay.

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: And also, I can provide this testimony in written form, I can send it to you so you have it as a record. Also helpful. So my question, I thought you asked some really great questions the other day when you were speaking

[Rep. Laura Sibilia (Ranking Member)]: with secretary Bradley Hughes about what what were

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: the substantial changes from last year to this year in the budget? What was the impact service delivered? What's the impact on your service delivery? And also, what's the impact on the agencies? I'm not sure if you've received the answers to that, but please let James and I know if you need assistance on tracking some of that information down. I know you have to write the letter to the appropriations committee and we want to make sure we're able to help you.

[Rep. Kathleen James (Chair)]: Yes, I do have to write that letter and yes,

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: I do need some assistance in tracking down that information. So, okay, so we can reach out, on that. Great. Is there any questions?

[Rep. Christopher Morrow (Member)]: Just to drive another nail in this coffin. So, there ADS is not losing any substantial transparency into the management of state IT through these changes. Is that accurate?

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: I can't speak for secretary Riley Hughes, but I can speak to the information that this committee receives and the project management standards that are used to oversee the project. I don't see any additional risk in the chance of incorrect deliverable being signed off on.

[Rep. Laura Sibilia (Ranking Member)]: I

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: know. It's still managed by them to their standards. They have they have great standards.

[Rep. R. Scott Campbell (Vice Chair)]: Spending authority for deserved projects will now appear in the agency budgets. That spending authority would include the cost of the project. It would be would cover the cost of project. So if it's a $20,000,000 complete overhaul of whatever system, that $20,000,000 would show up in a some year's budget. Mhmm. Right? In a in a fiscal year in a in a in a in the fifth fiscal year's budget. And then will be spent over whatever the time frame of that project is. That's correct. And if it turns out this project is under $100,000,000 project and and the administration and the legislation decide to pay for that over a course of years, then that spending authority will will look for We'll keep appearing over multiple years.

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: Yes. And I remind you that there is the annual report that does attempt to break down the the cost of projects across time over time or across the years. So it's five year project. They they make an effort to break that up. It it never aligns exactly because you have some deliverables that kind of Yes. Move around. But that's a good good resource, and it might be a good exercise to look at something like CCWIS and other conversation what, you know, what what is happening with that project and budget. And there wasn't a request for that project. There wasn't a budget request for IEP. And yet, I know there's an under there's those projects is supposed to move forward. And the question I would have, and maybe that relates to after, you know, after mark the March break. How are they how are those projects moving forward? Because Yeah. And so that's really

[Rep. R. Scott Campbell (Vice Chair)]: So I'm I'm I'm really haven't been on transportation to to the green or the whiteboard or something or other that AOT provides showing the status of, you know, a bazillion road projects. Okay. And, you know, this and and whatever the the authorization the spending authorization was was issued, they show the status of it and what the projected completion date is, you know, and how much it is is is going out this year and stuff like that. Is there something like that for for these projects? Or

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: Well, I think the annual report, you know, once a year, that's updated where you can see what the proposed spending across Tynus and when those, you know, the state dates have changed in the dashboard. But we, you know, we can we can try and look at, like, pick a project or two and track where we can find the information and when it's available. That might be a useful exercise. Yeah. In terms of oversight. So I can I can start on that too?

[Rep. R. Scott Campbell (Vice Chair)]: Well, it would be a good it would be great to have a summary.

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: Yeah.

[Rep. R. Scott Campbell (Vice Chair)]: You know, of of where everything is.

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: Yeah. Exactly. Yeah. I think that makes sense.

[Rep. Kathleen James (Chair)]: Alright. This has been super helpful. Always grateful to JFO. Great. So thanks for being here. Really appreciate it. Sure. Thank you. Yeah. Alright. Sorry about that. No. Believe our next guests have entered

[Rep. Christopher Howland (Member)]: Yes. We have, madam chair. All

[Rep. Kathleen James (Chair)]: right.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: We have.

[Rep. Kathleen James (Chair)]: We're not gonna take a break. Everybody okay with

[Rep. Laura Sibilia (Ranking Member)]: that? No. Let's go. Great.

[Rep. Kathleen James (Chair)]: So Where

[Rep. Laura Sibilia (Ranking Member)]: are you going?

[Rep. Kathleen James (Chair)]: Yeah. Hi. So we have already, this morning, introduced ourselves for the record, and I think you know us. So we'll just ask folks who are in the room to introduce themselves, which is you've already introduced yourself.

[Isaac Archer (Legislative Intern/Analyst)]: Isaac Archer, legislative interim, program center of Brisbane.

[Rep. Kathleen James (Chair)]: Super. And Jane Billbrook, Southworth. Great. Alrighty, so we are turning our attention from the FY twenty seven budget to whiplash, H-seven 27, an act relating to sustainable data center deployment. And we are joined by some new people. For the record.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: For the record, my name is Carrick Johnson. I am currently commissioner of the Vermont Department of Public Service.

[Rep. Laura Sibilia (Ranking Member)]: And I'm

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: TJ Poor, director, regulated utility planning at the Public Service Department.

[Rep. Laura Sibilia (Ranking Member)]: Great. So what we sorry.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: I was gonna give TJ some love right off the bat, but let's get right into it. What we thought what TJ and I thought would make the most sense is this is the first time I've talked to this committee, madam chair, with regarding data centers.

[Unidentified JFO Analyst/Testifier]: And I

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: thought, well, just a quick kinda view what we've been up to in this regard because we've been busy.

[Rep. Kathleen James (Chair)]: That'd be really helpful because we're just getting Yeah. Started.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: And so I'll cut to the chase on a couple of things. Thank you for doing the legislation because I think we may disagree on the exact language of the outcome, but this is something we're going to need to further explore. We're going to need, again, foreshadowing. We make sure we're protecting all ratepayers, even as we harness, as we leverage exactly the value that this can bring to the system. At least that's that's our department's view. So I'll hit some general stuff that I wanna make sure you're aware of. And then, TJ, we will more specifically into some of the things I'm gonna touch upon, including some specifics on the bill. So I trust that it makes sense. Good. So one, I've been engaged at the regional and national level trying to first understand what are data center developers? What are they looking for? And so the things distilling down, and I'll also say, we'll get into this a little bit, data center proponent advocates, hyperscalers, and the like have really evolved in terms of their comportment, their permitting political strategy. In the last sixteen months, it has evolved incredibly, and we'll get into that a little bit. But for right now, what are they looking for? Inexpensive energy, reliable grid performance, strong fiber network communications, when you think about it, that makes sense, and an expeditious, predictable permitting process. Now I'll let you all decide where how Vermont rigs in those win those categories, and people reasonably feel people can disagree. I would say that and I just checked this morning with the key leaders of utilities. Anyone kicking the tires on any data centers right now? There was the one I was aware of. I don't think it's telling anything out of school, was in the St. Albans area, and that has since evaporated. So there is no as far as I know today sitting here, madam chair, there is no active data center that's even or even just nascent proposal to date that's that I'm aware of that's being proposed for the state of Vermont. And as I said, the posture, though, for the data center industry has really changed. It was, here's how much energy I want. Here's the cost I'm gonna pay, and I want it yesterday. Now after the firestorm and things that have happened, the the new posture two examples that the committee and happy to provide these madam chair to the committee. Google hit I don't know if you had seen this, their capacity commitment framework. It's essentially the they have five pillars. And, again, I can provide this Sure. Where they talk about and it's kind of the things, to tell you the truth, it's things that the, the proposed bill gets to. They're saying, here's our commitments. Here's what we're going to do. We're gonna pay our own there's a whole series. I won't repeat all of them, but I'll just tell you. That's notable. The first company to do that, though, wasn't Google. It was actually Microsoft. Coincidentally, theirs is called the community first AI infrastructure plan. Community first AI infrastructure plan. And they have the five commitments. Now have they actually been held to those? Exactly. We'll see because it's these are this is the new political posture, the new advocacy strategy for these major players. So generally speaking, now that they've set that bar, it's kinda it kinda sets the bar where the other hyperscalers and what's happening. So that's happened just like, say, in the last six weeks. So things can just the point here is things continue to evolve. For our department, what I was seeking to do was tell me what happens if an application comes right now. How are we protected right now? And then, okay, what's our longer term kind of exposure, and what could we do depending what we find out right now in the technical sense right now? TJ will get into this, but the bottom line in here is we have sufficient regulatory mechanisms to ensure protection of Vermont ratepayers right now. However, they absolutely could be strengthened, and likely they should. But I wanna be clear, we see that the mechanisms are in place to look out for Vermonters. So I think to the degree the Vermont public is reading a lot about data centers, there is experience with dealing with large loads, and that's effectively what they are. There's a whole reg there's decades of regulatory experience dealing with large loads, ski areas, some notable industrial and commercial developments. I listened to a little bit of the testimony from GMP and heard heard there. TJ shared with me, I think it's, tariff 10. Is that what the one of them. 70. 70. Yeah. It's really close to. Tariff 70. So we have experience with this. But importantly, for our role, our department to protecting rate payers, we see, okay. If something was to come right now, there is no place you can just kind of escape and sneak in and get a perm. That's not gonna happen. So that's where we are. And we did a yeah. Yes.

[Rep. Christopher Howland (Member)]: Okay.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Sorry. So we began a review in oh, I'm sorry.

[Rep. Kathleen James (Chair)]: I have I have a couple questions before we move on, and we might get to this later. I just wanna voice out loud that my sense of faith in the commitment frameworks of the hyperscalers is like zero. Just want to get that on the record. But my other question is when you when you say that DPS, that we're protected right now and that we have sufficient regulatory mechanisms to protect Vermont rate payers, does that mean that your focus is sort of singularly on grid and the price of electricity? Because I've got concerns about these data centers that go way beyond that, like environmental impacts and water use and stuff. So my question is how how broad is your lens?

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Great, very fair question. So I would say the phrase that I frequently use, first secure the perimeter on rates. That's our lane, the department's lane. So one, that was our primary focus. But based on the team's, I think, talents and history in my own career, of course, we would look at it all. Now to be clear, that leads to some other concerns, which I'll come on to. I absolutely take your point about how much faith and let's see what results in the comportment of these hyperscalers in various regulatory jurisdictions. Having just come from Washington and the National Association of Regulated Utility Commissioners got back to late Tuesday night. This was the main two really two main topics. Three. Affordability, resiliency, resource adequacy, and data centers, which exacerbates item one and item two.

[Rep. Laura Sibilia (Ranking Member)]: I

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: mean, that is the function. So everyone is is right now focused on that. What does this mean? What can we trust? What are the best mechanisms? Where are the lessons learned? Which will lead to a recommendation, madam chair, that we have, that TJ and have, going forward. So point taken, we started with rates, but we're very aware, and we asked ourselves, who's gonna ensure, the protection of some of the dimensions that you talked about? And, thankfully, this is what happened, though, before show. Thankfully, what I would say is we have some experience, from our colleagues in the surrounding New England states. I think I've said before that, you know, I worked with seven commissioners prior to taking this role, and I have never seen the level of cooperation and collaboration like it is right now in the region. That's not just me. Ask if you get the opportunity, ask any commissioner from any of the other New England states. It's actually incredible. In this context, what's happening is Massachusetts is kind of a poster child of pain for, data centers in Lowell. Massachusetts both Massachusetts and Connecticut, according to NCSL, there there are two of 37 states that have passed incentive legislation to lure data centers to their states, which I've so what's happened is a lot of times you'll have economic development officials who will push for passage of incentives, But the in but the energy people in the same administration, you know, shall we say, are much more sanguine as to the benefits of data centers. And so I've seen that dynamic, take place. Point is we are now being informed by what's already happening in New England. So a couple of things there.

[Rep. Laura Sibilia (Ranking Member)]: What? Are you done?

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: Yep. I'm done. Yep. I'm sorry to

[Rep. Kathleen James (Chair)]: make your notes. And I think

[Rep. Laura Sibilia (Ranking Member)]: the chairs really started to capture my concerns. Yes. So rates, reliability. I mean, I and, you know, we heard from GMP. So stop. Roll back. Have you had any discussions with Secretary Moore about this?

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Secretary? The Agency of Natural Resources. Oh, sorry. I think, sorry.

[Rep. Laura Sibilia (Ranking Member)]: Just Yes.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: I just spaced. Yes, and Secretary Kerling economic development reasons. Yeah. So we are all everyone kinda understands our lane. We're kind of on point in that because because the first kinda regulatory stop typically is in the, you know, electric regulatory field. That's where we're at. Yeah. But not I would say not really of any depth. I mean, it's like, okay. This is coming. We gotta make sure that we are connected. Mhmm. And here again in the conversations with Massachusetts, and here's what we learned about water, noise. I mean, and actually having had my past with Velcro and understand when you're citing transmission, you know, and linear projects, wetlands or endangered species Linear. Maybe a

[Rep. R. Scott Campbell (Vice Chair)]: oh, sorry.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Transmission line. Right? It's a Linear? Linear. Sorry. No. That's okay. My my point is I'm very aware. We've had initial conversations, but I don't wanna and that's how I'd characterize it. So I wanted to make sure, in fact, that I would be able if I was asked this question to be able

[Rep. Christopher Howland (Member)]: to say exactly what I said.

[Rep. Laura Sibilia (Ranking Member)]: Okay. That's great. And, hopefully, we'll be able to hear from ANR soon Okay. Particularly on water issues. ACCD is a new dimension that I hadn't considered. Certainly, had not considered any kind of incentives for the commissioner. So I I wonder if we have to think about that as well. You should.

[Rep. R. Scott Campbell (Vice Chair)]: Excuse me.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: I may suggest that you should with respect, of course. I mean,

[Rep. Laura Sibilia (Ranking Member)]: we have very few economic incentives, so it's hard for me to imagine something like this would qualify for veggie or Here it is. To give people $10,000 to that's move here? That's from moving here. That's I'm Yeah. Good. Yeah.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Well, back to this issue, I would say that given the experience I know has happened in other states, so for instance, in Massachusetts, now have enacted where a data center developer is relieved of any of the sales tax on energy or any materials used in the construction of a data center. The energy regulators weren't aware apparently, this is all stuff I found out about the other state. Every two years in Massachusetts, they do an economic development piece of legislation. Nice. Massachusetts, their legislative process, it sometimes gets laid into June and July, apparently, and that was in the bill. They didn't know, and lo and behold, it's there. So now they're playing that was, I guess, two years ago. Now there's supposed to be another omnibus economic development bill, and they're seeking to rein in or inform or get more from if you're gonna get this, then you owe us this data center. So that's why I started with economic development because that's where, in my experience, were the most dysfunctional, were the least communication it

[Rep. R. Scott Campbell (Vice Chair)]: had. Okay.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: So I actually started with the economic development folks even before talking to secretary Moore. So that's that's what and, in fact, I just confirmed again this morning. I said, I just wanna make sure I'm testifying house in energy and digital infrastructure. This isn't anywhere on any, like, priority four. So it's nowhere on the the list. So

[Rep. Laura Sibilia (Ranking Member)]: Thanks for all your work on this. So so I guess I should dial back and say so. Thank you.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: I mean, to your point Yeah.

[Rep. R. Scott Campbell (Vice Chair)]: You're I I got a couple of things, too. Sure. So one one is these these projects would go through active 15. Right? Some. That that some? Well, there's

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: a couple ways to get to yes, which I'll which PJ and I will get to. Okay.

[Rep. R. Scott Campbell (Vice Chair)]: Good. I'm wanting your Excuse

[Rep. Laura Sibilia (Ranking Member)]: me. Just a couple there's

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: a couple ways to to forward it. Couple a couple ways to get a decision. There's a couple of paths that can be taken depending on if you're connecting to at the distribution, sub transmission level, or the trans or straight transmission level.

[Rep. R. Scott Campbell (Vice Chair)]: Okay. I look forward to hearing about that. And then the other thing I I hope you're gonna talk about is the impact of of incentivized data centers in Massachusetts on ISO New England power. Excellent point. Yes. And how that and what impact that has on on on for on?

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: I'm only gonna give you one compliment. Yes. Excellent point, and yes. So I would I would say that so I some of the stuff, I think we've already covered it. Did they meet it then the longer term? I already gave you the conclusion. So to your point, representative Campbell, regional review. And probably because I'm I'm really fortunate and blessed to have the team that we have at the department and the relationships and experience and insights. I viewed my role as there there's a couple ways that what happens regionally really matters to Vermont. So maybe there's gonna be no data center proposal Vermont. Really, any data center, any really size, Vermont needs to be kept aware of because of the impact really, say, two areas. One on, infrastructure cost. Is it gonna drive regional network service, RNS rates up, which I see nodding on head, so we'll pay. If it's driving reliability related investments, Vermont will pay 4% of that. I'll just also say on that in that regard, Massachusetts, the initial study they did, okay, what might be the impact? I asked specifically on, do you know exactly how any directional or any kind of ballpark figure for the impacts on RNS rates? One, importantly, no, that's a really good question, and we'll have to run that down. This it's a very initial study that was done, like, four or five months ago, before they started developing legislation for this session. They don't know you. So there's, again, two areas. One, what's gonna happen to the infrastructure charging rate, the regional network service, which Vermonters will have to pay? Two two is, wholesale power costs. The region isn't long on power. They they say we are, you know, in the summer and fair. But when as we have just experienced, when it's deeply cold for long periods of time, the system is not incredibly well built to serve that, and it leads to issues. And also

[Rep. R. Scott Campbell (Vice Chair)]: exposed to fossil fuel prices.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: It's exactly right. And, I think there's something like 20,000,000 gallons of fuel that was burned just over one weekend because those are the sources to keep the lights on and keep people warm and safe. So the point is we have some constraints already. We already have rising RNS regional network service rates. Where does this fit in? Thankfully, the good news is all the region, we're collaborating, what can we do here? We need to watch this. Is there a specific solution yet? No. There's two things that are, going on. So I already told you about that Massachusetts already passed their proposal. So that's another thing that can accelerate the need to get our act together on this. I think Connecticut also passed incentive legislation. And there, it it kinda surprises me because not only did they relieve data center developers of sales tax on the various materials and the like that were used to construct it, They also relieved the the requirement to pay property taxes. Yeah. So I thought, why would a town I mean, I didn't get it, but they really they were, like, the first out of the gate in New England to do that. They don't yet have a handle, and I'm not sure what kinda data center they are. Honestly, right as I sit here, I don't know if there's any data centers actively being pursued in Connecticut. I am aware there's, like, two gigawatts of projects that are at least being considered. No ability to share with you because the Massachusetts regulators themselves currently have no ability to determine the true viability. I mean, is this real or is this a phantom project? Don't know yet.

[Rep. Laura Sibilia (Ranking Member)]: In in terms you said in Massachusetts, they're looking at kind of scaling this incentive down. Are you aware of that in Connecticut? Any efforts in that regard?

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Excuse me. I'm just, again, my homework for today, Connecticut now is, developing legislation, but I don't I just found out about it last night. I don't know exactly what

[Rep. Laura Sibilia (Ranking Member)]: Scale down.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: I would say more better protect.

[Rep. Laura Sibilia (Ranking Member)]: More better protect.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: More better.

[Rep. Laura Sibilia (Ranking Member)]: I like this. Call more and Fair enough. It's good.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Well, I I I don't wanna miscarriage as scaling down. I think they're trying to moderate the the come here, the incentive stuff to get, again, something more in response. Sure. Yeah. Bram Morrow?

[Rep. Christopher Morrow (Member)]: I have a very basic question. Yeah. Why would any data center want to locate in the highest priced market in the country? I

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: think that is an excellent question, which is why I led with here's the kinda, like, four screening criteria that some have. I could, though. I could see a case where if a data center said, look, we have a bit more time. Well, first I would say this, and this is not my thought, but I heard it Tuesday, and I thought, boy, that's something for us all to consider. The rise in lows, the rise of this industry has been seismic in its impacts, but it is so narrowly focused. It is so interdependent. It's this one industry that's driving all this rise. There could be a seismic drop in load because it's such a dynamic, innovative field. For instance, Jensen Huang, the CEO of NVIDIA, announced now, it's like six weeks ago, hey. Guess what? Our new generation of chips, we're not gonna need to cool it with water. We're not gonna need cold water to cool it. That is 30% of the energy you'd have a given data center. Now that will take time to work through and get into what particular data center is being built. The only thing I could see that would, excuse me, The one appeal perhaps, and I'm not a data center developer, could be, if you're looking bluntly for the cache of Vermont, like it's a renewable, much more climate conscious state. And so we're gonna I mean, I could write it. We'll build our facility in harmony with Vermont's working landscape and leverage. You know? I could see the well, I could see the phraseology, but these people boards. These people are serious business people, though. I think it's very unlikely, but I also think there's some for here in Vermont, even maybe for the region. But I think there's a not here, but there's a willingness, I think, in some of the Southern New England states to cut more to cut more favorable deals, bluntly, just as they have a greater raft of incentives for economic development. Generally, they're willing to sacrifice a bit more on some of the things you identified, water quality, I mean, community impacts. For the sake of that. I could see a similar kind of, contract, special contract or something or the like that would be executed with their in some of those states. I don't necessarily see it like that. Well, sorry, TJ.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: Yeah. Just the only other thing I would add, and I'm also not a data center developer, as you know. But New England, like, what is it known for, especially, like, the Massachusetts, Boston area. Right? World class research, medical research, education. Right? To the extent that those industries are building up their data needs, you know, there could be some nexus of citing a data center, close to that as it gets closer to Vermont as then is it Dartmouth, UVA. I I don't know. I'm I'm throwing out those names. I have no, like, knowledge of anything happening in those, but just that those kinds of industries could, like, be a draw, in theory for a a data center to locate.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: I I think that's an excellent point. Also, like Hartford, the insurance industry in Connecticut, for instance, which is why out of this whole discussion, I mean, I've become aware of it. There's, like, 20 or so data centers right now already in Massachusetts for precisely the reasons that TJ Yeah. Tiny bubble one. Like, 20. I Do you

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: have a collar? Do you have a collar?

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Yeah. Exactly right. Okay. So the other thing that's going on at the state level, given these concerns over RNS rising RNS regional network service rates and the impact on the wholesale power market is, it's kinda, I would say, two prong. One, and I would characterize this, there's there's initial consensus. So Massachusetts and Maine and Vermont, I want us to have, again, regional conversation. Massachusetts and Maine have been wonderful. I think Connecticut was just busy. Well, I don't know we'll come along, and New Hampshire, they have a more difficult time. The understanding is likely each state is going to enact some, exactly what's being considered, some kind of state legislation to better protect its individual state interest, rightfully so. But let's at least sure that they're in harmony with each other, then we're not doing something that is diametrically opposed. And they're sort of are we all in kind of moment, so everyone's kind of in, and that's essentially what we're working on. And that's part of the issue. The greater collaboration and cooperation we have among the six New England states, the greater alignment on data center related large load tariff kind of legislation, then we can turn to what is the role of ISO noise? Exactly what can the regional grid operator do to incorporate what might be coming into their planning process so we don't overbuild and we don't underbuild for, guess what, day to day reliability because there's already absent data centers, there's a lot of change. There's a lot of modernization. There's a lot of electrification as this committee's already heard. There's a lot going on already.

[Rep. Laura Sibilia (Ranking Member)]: So may I just I you are telling us, sweetie, really, the states to have some better alignment in order for ISO to really be effective in this space.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: I would I would yes. And I but I would state it this way. My experience, the most effective way to get ISO to secure the most constructive rule for ISO New England is to have the greatest amount of agreement on exactly what the states are accomplishing themselves

[Unidentified JFO Analyst/Testifier]: Mhmm.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: And what they're asking of ISO. When the states are discordant and ask different things, I don't blame us. This is we're all doing this. We would ask you. Here's precisely what we're hoping to roll you to. Early stages of that, ISO right now has begun at the urging of regulators, consumer advocates, and the like at the regional level. They are collecting anonymized data from the region's transmission owners. So the so you think, Abon Grid, National Grid, Eversource, Velco. I'm trying to think. Am I missing the name? Rhode Island. Rhode Island. Rhode Island. Data. It is it's exactly what I just told you, the little bit information I have from Massachusetts. Where are the data center? Where are you getting large loads that are are saying are you having conversations? Are there stuff going on? So there, it's like, typically, are the conversations that are confidential, where you just say, well, maybe I'll I'll do that because when you're trying to get access to the competitive it's a competitive wholesale market, the data centers want access to. Those are private commercial conversations, but the transmission owners have agreed to share that with ISO New England and ISO New England terminals aggregate and then incorporate that information into their twenty twenty seven twenty twenty seven, I have to remember the name. Capacity, energy, loads, and trans this doesn't come trippingly off my tongue. Capacity, energy, loads, and transmission. This it's called the SELT report. That's an important think of Velco's Vermont Long Range Transmission Plan, where a lot of things key off of that. This is a foundational document for the region, and the idea would be, okay, we know where we suspect we've seen as many as 15 gigawatts worth of data centers spread around New England. We're gonna we're gonna discount that and maybe say we're gonna need an additional three megawatts in maybe capacity or stuff or energy we're gonna need. Now that's gonna have real world costs on all of New England's ratepayers, which is why the New England states are motivated to collaborate together, be clear on what our roles are, and then see exactly what our ask advice on New England is and what kind of tariff changes, if any, need to be made.

[Rep. Laura Sibilia (Ranking Member)]: Yep. Any discussion amongst the states about bring your own power?

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Yes, absolutely. It's because, again, this takes this conversation takes place against the context of if you're if there's gonna there's been such strong federal opposition to offshore wind. Mhmm. There's been alienation of the province of Quebec for for energy. We just talked about the winter situate where are we gonna get? Mhmm. Because Vermont, for instance, they've talked about if we meet our goals or come close to meet our goal, we'll double, go to a 2,000 megawatt load instead of a thousand megawatt load. The rest of the region, roughly, you can just say as a rough directional, okay, if that's the case, Where are gonna get those electrons? So any and all electrons are are the like. I I will tell you at least and, again, this is kinda ill formed, but I am mindful that the strength of the grid has been and I think Vermont has especially borne this out, especially compared to our neighbors, been the shared experience that we're all in, you know, of a grid, but I can absolutely see great benefits. This is such a new high volume customer that's gonna have such huge demands and burdens on the system. It's almost like they could be required, to bring generation. That's what's going on. People say, should we require them to bring something to the party if they want a a look and

[Rep. Laura Sibilia (Ranking Member)]: And as the bill sponsor, I will tell you, my thinking is evolving pretty rapidly Yeah. That that's where we need to go, particularly around emissions, which is something I would hear a lot about.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Fair. And I would also I'll I'll it's in here. I would say what TJ and I have talked about is, just for a few months now, is building in a requirement that you have to have the capacity and work collaboratively with your with the distribution utility in whose service territory you're located on flexible load management. Work to deliver have some regulatory structure that ensures that's to me, I see that as one of the key tools to leverage AD upside value. So and there's different data centers. Right? They're all they're not all doing the same things. Training training periodic there's different creatures that are doing different they're they're using different amount of electricity at different different times of the day. They have flexibility, ostensibly. So the thing would be, are required to get to yes to work that out with your host utility as part of the requirements to get to yes.

[Rep. Laura Sibilia (Ranking Member)]: But that is not bring your own. That is plugging into the

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: It could you're absolutely right. It isn't explicitly bring your own. It could be we're gonna have a you know, in Vermont,

[Rep. Laura Sibilia (Ranking Member)]: it could be when there's

[Rep. R. Scott Campbell (Vice Chair)]: Yeah.

[Rep. Laura Sibilia (Ranking Member)]: But But you're still plugging into mix.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Yeah. Well, then also, you could be your back to emissions. Like, this kinda goes goes to your to your question. The bring your own may be a yeah, massive Yeah. Diesel generator in the board.

[Rep. Laura Sibilia (Ranking Member)]: Oh, Vermont. Yeah. I just

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: I'm I'm just saying the options for backup power in Vermont I mean, you could go to where there is natural gas, like, in Chittenden County and the like, you know, avail of those, but I see your yes. I understand. But I'm just saying back to representative Morrow's point. It's it's it's kind of a tough gig. You can hear me and meet all the stuff.

[Rep. Laura Sibilia (Ranking Member)]: I would note we have a large load in state that is compliant with the res and is their own generator. That's what I think about that's what I think about when I think about

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: bringing her own.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Yeah. And there's and that could be largely replicated. Right?

[Rep. Kathleen James (Chair)]: Okay. Time check.

[Rep. Laura Sibilia (Ranking Member)]: Yeah. Okay.

[Rep. Kathleen James (Chair)]: How are we doing with your testimony?

[Rep. R. Scott Campbell (Vice Chair)]: I'm gonna be

[Rep. Kathleen James (Chair)]: done right your testimony. No. It's okay. Just we're not in a huge rush, but this is our committee.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Well, I know, but I'm So we need to be done.

[Rep. Kathleen James (Chair)]: We never know what happens.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: I I would say so then quickly, this is well, thank you, manager. This is a segue. I would say, TJ is gonna review in detail. We do support the theme seeds comments. Yep. But one other thing I really wanted to and I have one more resource that I'll commend to your attention. It's Smarter Energy and Power Association, SIPA. If you haven't heard of this, I'll I'll send it to Alex. A link to the website, it's a nice one stop shop. Here's what's going on in every state. I think NCSL, they'll they'll provide, generally speaking. This was the most user friendly that I have seen, and it's updated. They're doing it in conjunction with a a North Carolina educational institution. CHIPA is a real reputable kind of forward thinking organization, and they have a map of large load tariffs, who's doing what, what's happening, and what did you can click and work. It's a great resource, so I would commend that to your attention. Lastly, madam chair, and I again, I'd like to say I thought of this. I did not. What I heard is that that makes real sense. And I have already had initial conversation with PUC chair McNamara. And however this relates in the legislation, especially because we don't have an active data center application, now would be the time to have a technical conference to build a record of facts of what we know, what we don't know, where's the best kind of lessons learned from other states, what do we see happening to craft. So it isn't just I see that as the best vehicle for putting into effect the most useful kind of regulatory protections that we could achieve.

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: Can you explain what a technical conference is or just define it?

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Sure. Let's teach it. Here's how I under understand that. Effectively, it's the PUC would issue we could we could the department could request it, and then there would be some could be some back and forth, including we suggest these parties we'd like a technical conference on data centers, and I'm thinking of the provisions of your bill, that that addresses these areas. And we're gonna send it out, and we would have an idea of who to send it to. The people say, alright. Vermont World, especially others, what do you think? Here's the agenda that we're thinking about. Does this make sense? How might this be improved? Then there could be some back and forth.

[Rep. Christopher Howland (Member)]: There'd be comments on that.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: And then you I've seen conferences where you've had, alright. Phase one is this. Phase two is that. And on this day, we're gonna concentrate on the regional impacts. Here, we're gonna go state impacts and the intersection with act two fifty for creation, replicating the global foundries and have them have an industrial or commercial customer data center creating its own utility. What's that like? So you're able to have on the record, where people are you know, that it's I don't know about the opportunity for cross I don't know that it's cross examined. I think it's basically people do presentations, and there's Q and A presentations, and then you can have, here's what we heard, what we think. All you people attended, what do you think about your hearing? Is there respond to that and, and see what you think. And then you're able, typically what happens, they do a summation of the proceedings. Here's what we've learned. A lot of times, well, you could say, now that we've understand this better, we don't think anything needs to happen. In this instance, I think it would be happened. Now based on the body of evidence we have, the review, we're gonna suggest that we do these things. This could be by statute. I think even more likely, I think, because, TJ, when we were talking about flexible load management requirements, it could be build your own. We can build that into a requirement, I think, through regulation, but you would nail that down so you have the proceedings, then you have the summary of the proceedings with recommended steps. I'm just looking for us to capture. There's there's places who are going through this now we can learn from, and

[Rep. Christopher Howland (Member)]: I think you have a little

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: bit of time to do this right because there is some upside.

[Rep. Laura Sibilia (Ranking Member)]: There's there is some upside here. Let's get okay.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Thank

[Unidentified JFO Analyst/Testifier]: you, madam chair. Yeah.

[Rep. Kathleen James (Chair)]: I'm bringing out the chopstick.

[Rep. Laura Sibilia (Ranking Member)]: How

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: how much time do we have?

[Rep. Kathleen James (Chair)]: I Well, we really have until noon.

[Rep. Laura Sibilia (Ranking Member)]: Okay. Okay.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: That's that should be plenty

[Rep. Kathleen James (Chair)]: at the time. Thanks. Did I miss anything up? Nope. We have until lunch.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: Okay. Great. Noon is much more specific. Yes.

[Rep. Laura Sibilia (Ranking Member)]: Yes. Lunch could be tomorrow. Yeah. Okay.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: So we get a lot of good high level and regional picture from commissioner Johnson. I'm gonna drill down a little bit into what is our current regulatory process and what, like, for interconnection of large loads. Is this you know, data center is a large load. There could be other large loads, like a skier that could expand or I know. Yes. Bitcoin mining. Right? There could be other other things. And so, really, our initial review showed that act two fifty, section two forty eight of title 30 provide a lot of strong protections for Vermonters and Vermont. But as the commissioner said, there could be some clarifications or improvements to, like, ensure that what we think are strong protections are, like, rock solid and really protect ratepayers, but also facilitate the opportunity for benefits to come to ratepayers. So currently, we're focused on the electrical impacts and energy impacts, but I'll spread to other areas. A data center's load or any big load in Vermont must be served by an electric distribution company. You can't, you can't take service unless one of our franchise utilities actually delivers that power. So that's all covered under title 30, covers the framework for electric utilities. And that is what where the Public Utility Commission gets its authority to regulate those utilities, issue certificates of public good, and that's required for utility operations, which include constructing operating facilities. And so under two forty eight, if a utility needs to build infrastructure to serve a load that will come under the Public Utility Commission's jurisdiction, they have to issue a certificate of public good. So and that that's true no matter if the it it's that load is served by at a distribution level, like a low lower voltage power level or the transmission level. If it's even if it's connected directly to Velco, it still needs to be served from a a retail electric utility, which is not Velco. Velco does not, provide that service. So, we'll start with the the smaller ones first. So if if, loads are connecting to the sub transmission level or the distribution level that's under 115 kV lines, kilovolt lines, right? That's an electric utility has to provide what's called an ability to serve letter. And so, you know, a customer will come and say, hey, Here's our facility. Here's our expected, electric draw. Can you serve this? The electric utility either says yes or no under that ability to serve, or it's yes, but we have to build a new substation, or yes, we have to upgrade these lines. And with those upgrades, the cost causer needs to pay. The customer needs to pay for that. And those that letter so with those upgrades, again, they'll go through the $2.48 process, but that letter is also, used to support act two fifty permits. So act two fifty requires that our proposed development will place an undue burden on existing services and infrastructure. There's, a number of criteria under that, under act two fifty. It's criterion six mentions educational service, but it's been read in practice to broadly mean all public services and infrastructure. Criterion seven there relates to municipal services, and and nine a is related to future infrastructure capacity. So, like, down the road, what is gonna be needed? So if a utility can serve the load with or without those investments, then it it'll do so through a tariff, either through an existing tariff or a a direct contract. And so which is it's kind of like a specific a specific tariff. And really, those tariffs, again, come through public utilities, commission jurisdiction and need to ensure that, there's equitable contributions from the cost causer for all costs that they're causing. And so that tariff structure needs to get approved and there's in approving that, the commission has to look out for all other ratepayers in that instance.

[Rep. Kathleen James (Chair)]: I have a just a quick question. So if you realize this is hypothetical, but to me, what I'm taking away from that is that as long as some deep pocketed data center developer was able to pay.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: Alright. If they paid for all of the impacts of the so then there are other criteria under two forty eight. So it's not just the electric criteria. That's where I started. So two forty eight has a number of criteria, like orderly development of the community, which looks to regional planning commission and municipal plans. There's aesthetics. There's water quality, natural resources. Those are the ones, agency natural resources comes into the PUC process and testifies on those. And so it's not just the, ratepayer impact Right. In February, it is some of those, those broader

[Rep. Kathleen James (Chair)]: I just wanted to make sure I understood, like, that one particular impact on rate payers if I realize this is all, you know, unlikely, but if Microsoft comes in, it was like, well, the cost of the transmission upgrade is peanuts to us. Here's your money. So then we fall back on the other criteria.

[Rep. Laura Sibilia (Ranking Member)]: Right. And and it it so I'll get into this too, but it one of

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: the criteria in February is economic benefit. And so that, would be broader to, in my mind, and I think this is a place for potential clarification. But as I read that, as we read that, and as we would advocate in the, commission process, that would include, okay, these are gonna have market impacts that, you know, your generation, to your point earlier, Campbell, this is gonna affect the wholesale market clearing price or capacity prices. We need to evaluate that impact as well, so not just the transmission or the infrastructure interconnection impact. That's me saying that right now the department would advocate under the economic benefit criteria on that, that is an area that I think it's strong enough for us to do that, but we could clarify that and improve that to make it explicit that those types of things need to be considered under that criteria.

[Rep. Laura Sibilia (Ranking Member)]: Clarifying that. So I think it was Title 30 with the cost causer. Yes. So are there any exceptions to that in terms of infrastructure? So I mean, any infrastructure that these need, they would have to pay what you're saying.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Okay.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: It's Right. So yes. And so the way that, just to be clear, the way that we look at that and say, okay, we need a new substation, but or an increased size of substation, but this substation was going to be replaced in six years anyway. And so, ratepayers were gonna replace that substation. We wanna do it now, so it would be the cost of advancing the, time of, when that substation was going to be reconstructed, and it would be the cost of increasing the capacity. But so some of the costs then, basically, ratepayers would be held harmless in that effect because we were going to, you know, rebuild that substation in six years anyway, ratepayers were gonna pay for that, and that all the incremental costs would be covered.

[Rep. Laura Sibilia (Ranking Member)]: Water as well? Water infrastructure?

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: I don't know the answer to that question. I mean, water I don't know if that comes under the 248 jurisdiction. I think you could we'd argue that that would be part of the broader economic benefit criterion that that would need to be paid for if it you're requiring all these upgrades to water infrastructure, infrastructure, that it would it it would need to that that would go into the calculation of economic benefit. So just to I it just I'm trying to think of who to answer your question of who you should ask. That could be the commission, I think, on February and agency of natural resources on on new water infrastructure. Well, and

[Rep. R. Scott Campbell (Vice Chair)]: our partners are processing same thing. Right? Right.

[Rep. Laura Sibilia (Ranking Member)]: Correct. 50. Yeah. So if we wanna understand if there are accept any exceptions to the cost causer having to pay for the expanded

[Rep. R. Scott Campbell (Vice Chair)]: infrastructure. Right.

[Rep. Laura Sibilia (Ranking Member)]: Like water, we should talk to ANR and the commission.

[Rep. Christopher Howland (Member)]: Yes. Thank you.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: I would just add an answer. I think. Right? When we say $2.48 versus $2.50, it's the same. It just isn't a difference to local plants. It's the same criteria, I think. Is this It's, like, all the same.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: Well, there's there's two different so yes. Okay. Yes. They're very similar, but, you know, there's the electric infrastructure and and, you know, public infrastructure, like water, you know, water that I think that that side of it, act two fifty, may even handle better. Might be the land use review board might be another good option to to talk to. A data center, if it didn't need any electrical upgrade, right, no cost, then it still would need to go to act two fifty and through, like, those local zoning, and I and then that would be need to be covered in act two fifty. And I I am not quite familiar enough with, like, act two fifty for, you know, general commercial construction, industrial construction projects to really speak much more than

[Rep. Laura Sibilia (Ranking Member)]: that on that. Sure. Thanks.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: Okay, so distribution system went through for the transmission process for use of the if they are going through a current retail distribution utility, I talked about a tariff or a contract. Right? And we mentioned earlier, Greenmount Power has has a contract that formerly Global Foundries was on, and it's rate 70, and that's available. And that's that's for transmission interconnected projects. They take power directly from the grid. And again, those customers pay for upgrades to the transmission system necessary to serve their load. Or and this, you know, from folks we talk to think this may be a more likely path or a data center if they were to connect to the transmission system, is they would apply to the commission to be a self managed utility like like Global Foundries is. And if they do that, that also goes through the commission process under Right. Multiple statutes, two forty eight and two thirty one, I think, is, broadly speaking, kind of a company's viability to be, you know, a good, a good citizen in Vermont, essentially. And so the commission reviews those projects under, under those criteria.

[Rep. Laura Sibilia (Ranking Member)]: Those are all subject to the press.

[Unidentified JFO Analyst/Testifier]: Subject to Rest requirements. Yes. Well,

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: I have to check. I believe the self managed utility statute says that, but I know GlobalFoundries is Yes. Is subject to the rest. Yes. So the other thing that that happens when a large load connects to the transmission system is that ISO New England needs to determine that there'd be no adverse impacts to the transmission system. So there's a, or that adverse impacts are mitigated through necessary upgrades. And so that process is being worked out. You know, when a generator, a large generator wants to interconnect, there's a very specific process that they have to go through. And so at as of today, does not have that process for large large loads, and that's part of what they're developing. So when a large generator interconnects, right, there's a very specific process that they have to go through for to study the system to study the system and to understand what the reliability impacts are. For load, that process is not defined by ISO New England right now. And so that process is, I think, I you know, the states and other things the states are doing are urging ISO to, like, okay. Let's talk about this, define this process. I think that the thinking now is that ISO New England would probably apply a similar process as they do to the large generators, but it is not not defined. And so that's, like, liability study. It It actually takes some time, usually like a year for those studies. So it's not something that would like happen tomorrow. We do know that it would need to go through ISO New England would need to make a determination of the transmission level impacts.

[Rep. Laura Sibilia (Ranking Member)]: Question. Dave, I get my NEPAL and NESPCO confused, but are those the organizations that or is how the states talk amongst themselves and talk to ISO 90?

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: Yes. So, New England states committee on electricity is Nesco. Commissioner and I are both managers of Nesco, and each state has rep representatives on that committee. And so we talk amongst ourselves, and NEESCO often communicates with ISO either on our behalf or and files comments as kind of joint state's comments. The states also talk with ISO, and we talk with ISO on our own and have meetings. You know, last month, we met with a couple of board members. And so we have those conversations as well individually. NEPAL is a broader kind of framework, that governs, ISO New England, of which Nesco is a component of. And so NEPAL encompasses, like, transmission owners. It is a sector, an equal sector, and generators are an equal sector of public public advocates. So, etcetera.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: I I think NEPAL is a stakeholder process. There's votes. Here's what we're gonna do. And and so ISO will be there and say, okay. What does everyone think about this? And do we and they vote on projects and, like so that's like the voting organization for every stakeholder. NESCO funded through a tariff, so it gets direct funding from electric ratepayer. Very sophisticated analysis. They can file at FERC. They seek to work very collab what they try and do is distill one, hopefully, one position on behalf of all six New England states and help represent that one position to ISO New England. So that is, like, the state's advocate within the ISO broad ISO cross. Everybody. Dara.

[Rep. Laura Sibilia (Ranking Member)]: Thank you. You're welcome. So,

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: talk about some of the risks. So we think the regulatory process is pretty well suited to address risks and and in

[Rep. R. Scott Campbell (Vice Chair)]: order

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: to leverage the opportunity that could come. Right? Opportunity is really if we can we can address all the risks, additional load could actually have decreased rate pressure and provide other community benefits. But that there's a big if in that sentence. Right? And so some of the risks that we're thinking about, and and these will not get to some of the natural resource or water quality risks that you raise, which are are definitely real and acknowledge those. We already talked about the regional network service charges, the the impact on you know, if it has impact on reliability, more transmission built, Vermont pays 4% of that. Energy and capacity prices. Right? So the significant new loads could increase the the marginal energy costs. Vermont is pretty well hedged as we talk about in the short term, but those prices would eventually flow through to rate payers. Right? We're hedged for a certain time. Once a contract falls off, we have new prices, and that sets the basis for negotiating the next hedge. And so those eventually do flow through to prices for Vermonters. Also, I'll just say we're we're pretty well hedged, but when we get into a long cold snap and demand goes really high and maybe higher than we hedged for, then we are subject to those, those prices, that price risk. So there is some short term risk and then there's but it's not like other states sees a short term risk because we have the hedging mechanism. That those that upward pressure on energy and capacity prices, I I'll say it separately here, but it includes the cost of meeting renewable portfolio, renewable energy standards. The same dynamic is there if there's, you know, we've seen in other states like Microsoft outbidding states or outbidding, utilities for renewable projects. Right? And so if there's that much more demand that raises the price of the supply because the next project might cost a little more. And so that has it's not like a direct you're necessarily seeing that directly, but it's an impact that, you know, if even if a a data center came, brought it, you know, said, hey. We're contracting for the wind that it's gonna be developed in Northern Maine, and, well, that wind's now not available for Fremont power to buy. They have to go to the next higher price project.

[Rep. Laura Sibilia (Ranking Member)]: And and similarly with nuclear, I would encourage you.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: Yes. Yeah. I I you know, that's So driving up It's just like a supply demand dynamic. Right? Yeah. The if I I would say that for any energy resource, even if we didn't have environmental standards, it would apply to natural gas as well. Right?

[Rep. Laura Sibilia (Ranking Member)]: And and improving markets for things like coal, perhaps.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: The only I just if I may manage. I do have a soft spot. The the one thing I would add there is your point is incredibly well taken because the leverage like, say, in Connecticut. The the the leverage over okay, Milestone. Who are you gonna sell to? I mean, you have to deal with us as this as the elected officials. And I was like, well, fine. We already have it. We've already extended to the NRC. We have another thirty years of operation. We'll talk to you about the, you know, offtake if you're if you wanna do a contract. But we have we have three people lined up who, you know, who who'll take it off the next twenty years at this price. So to your point, representative Sibilia, it has fundamentally changed the negotiating kind of landscape of of what's had already that sort of happened.

[Rep. Laura Sibilia (Ranking Member)]: Yeah. And really starting to become, like, very clearly bring your own generator that complies with our res for New England.

[Rep. R. Scott Campbell (Vice Chair)]: It's more about

[Rep. Christopher Howland (Member)]: source or no. She just mentioned that that if they contract for main energy, energy coming from whatever the source of main is gonna affect the transmission system theoretically. Meaning, theoretically, means that the real flow is going down towards the coast and the electrons go in that direction. What where you have your contract and where you pay your wheeling charges for is sometimes a paper mache.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: I I I do wanna yes. Absolutely. That's a contractual arrangement. The grid reliability is grid reliability, and that's accounted for for whatever the contractual arrangements are. I think we're we're just touching on a different facet of the same to TJ's point. Every time there's more people who want the same energy, the price is gonna go up. Right.

[Rep. Laura Sibilia (Ranking Member)]: Right. Director Poor, how are

[Rep. Kathleen James (Chair)]: we doing with your time and your take and your testimony?

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: I probably have seven more minutes of testimony.

[Rep. Kathleen James (Chair)]: We're gonna let you finish without any further questions.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: Well Go

[Rep. Kathleen James (Chair)]: ahead. And just everybody, vote your questions. I'm So

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: two other two other risks, capacity, we just talked about regional reliability, capacity constraints, resource adequacy, right, making sure, you know, when the system is stressed, right, do we have enough resources? We've in the past entered in, ISO New England entered into out of market contracts to, you know, ensure that we have that supply. There's other markets that are, have been implemented that are actually really expensive right now, and it just kinda adds to that, to that risk. And the other one I'll mention is stranded costs. And I think, this is talked about in your legislation, and I I was very happy to see that. And is is, you know, if a data center comes and causes all this investment and then they say, oh, whoops. We're bankrupt. Yeah. Velco has the right to, like, go after them, but are they really gonna be able to? And so having some sort of, collateral requirement or whatever, it you know? Again, I think our regulatory structure could can't as it's currently situated, could address these risks, but the types of things you have in the legislation, the intent of those of clarifying that you must consider these things is is actually helpful. And so Alright. Had

[Unidentified JFO Analyst/Testifier]: to mention the words

[Rep. Laura Sibilia (Ranking Member)]: You're saying that's not what I know. I gotta go. February 13.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Mark this down.

[Rep. Laura Sibilia (Ranking Member)]: It's all busy. So I

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: I also just note that we're subject to a lot of these risks even if a data center locates outside of Vermont. Right? And that's another reason why we're really working hard with VESCO and NICE New England to have some of that shared principles as we move forward and ensure risks are mitigated. Okay. So specific recommendations on the bill. First, we I think we would a little more time to work with you on this to kinda hone in. It's we're we're not you know, we don't have, a red line right now, and I don't know if that's the next best step or just kinda general and go forward. But first, agreeing with the commission's recommendation that they provided in writing the other day that utilities be required into enter into what what might be termed like a large load service equity contract to ensure that ratepayers are protected and that there's a clear regulatory process for large loads. And I say large load because I think this is all all this stuff is relevant for any type of large load, whether it's a data center or not. And and where the legislature could set the guidance in, you know, and a lot of the criteria that we talked about that you have in 07/27 here could be that good guidance for utilities to go by or for the commission to approve such a contract they need to address all these things. And you could incorporate by reference or explicitly the February criterion in that, which, as we said, includes natural resources, water quality, and economic benefit could be specifically clarified to include those risks that we talked about, resource adequacy, impact on energy costs, contribution to the embedded cost of the system that we already have that we've built to facilitate, you know, new loads, meeting the renewable energy standard and also, contributions to efficiency charges. Some of those things might seem obvious, right, but that gross receipts tax, those things could be considered, right?

[Rep. R. Scott Campbell (Vice Chair)]: And you'll provide this in in writing?

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: Yeah. I'll I'll provide these. Yeah. Alright. Yes. I was

[Rep. R. Scott Campbell (Vice Chair)]: trying to scribble it down, but I gave you a few moments. Alright. I believe that was a question.

[Rep. Laura Sibilia (Ranking Member)]: That's enough.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: I'm sorry. Well, I'm here too often.

[Unidentified JFO Analyst/Testifier]: I had a little too This is good for me

[Rep. Laura Sibilia (Ranking Member)]: to watch. I don't mean to be so casual. Sorry.

[Rep. Christopher Morrow (Member)]: You're this guy. Hugging.

[Rep. Laura Sibilia (Ranking Member)]: I know.

[Rep. Kathleen James (Chair)]: Once he got his mom

[Rep. Laura Sibilia (Ranking Member)]: I Well, he's gonna

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: move in. Where's your seat?

[Rep. Kathleen James (Chair)]: Just give me

[Rep. Laura Sibilia (Ranking Member)]: a challenge. Yeah.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: Yeah. And really, importantly, address the risk of stranded costs. We talked about two other things that we haven't. Consider requirements for boat flexibility. That's a real option, I think, for the capacity piece, and or bringing your own generation specifically. Also say consider that, and we'll go from there for now. The other thing is one of the things we've heard in other states is that, and I think this is less of a problem in Vermont because our utilities are vertically integrated, but transparency and contracting, that is, like I said, less of a problem here, I think, but something to think about. Other states with retail providers, they enter into a contract in NDAs, nondisclosure agreements, and then regulators and public officials have trouble actually, you know, understanding what the deal is and what the impacts are to, ratepayers. So, just another thing to add to that.

[Rep. Laura Sibilia (Ranking Member)]: Alright.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: Couple other recommendations. Citing of the data center facility itself, this is another commission recommendation in writing that that part should remain in act two fifty jurisdiction, not be the public utility commission jurisdiction. I'll just let the commission's comments stand there and and say we support it. Commissioner talked about a technical conference. You could put that in the legislation to ensure it happens. Think it probably would happen anyway, but then a couple of other things, just we wanna further consider whether in the frequency and content of the reporting on data centers, there's some obligations in the current bill that come to the department and to to data centers and not against reporting at all. We do lots of reporting and for good use, but I just wanna ask for more time to kinda review that part of it. And then the we have some concern about the section two eighty eight that is the intent that will kinda tax this particular sector of the economy and use that specifically for other purposes and pull that tax out of the general funds. We haven't connect maybe you have, but we haven't connected with I haven't connected with my counterparts and KCCB and PACS and so to kinda talk about that. But I just there's some concerns about the signal that it sends to development in general and then whether it's any sort of large load and then how that really would be structured. And I know it's kind of a study, but but I just wanna flag that today and maybe come back

[Rep. Laura Sibilia (Ranking Member)]: to talk about that more. And gross receipts is listed as one

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: of that. Right. So the ensuring that they're kind of taxed appropriately is one thing, and then using that tax for you know, or or having an additional tax, using it for a special purpose that just raises some flags. Yeah.

[Rep. Laura Sibilia (Ranking Member)]: So

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: that's the last thing. I I think we look forward to working more on this. I mean, there's a lot of good things here and a lot

[Rep. Laura Sibilia (Ranking Member)]: of good intent, so hope to work I have a question. Sorry. Go ahead, Scott.

[Rep. R. Scott Campbell (Vice Chair)]: Specific question hasn't been mentioned exactly, and maybe it doesn't have to be, but talking about bring your own power, there's also a call to transmission upgrades or infrastructure upgrades along those lines. Is existing practice that the the cost causer pays, would that apply to to a data center also if if it required transmission upgrades? Yes. So that's why Yes. As I mentioned.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: Yes. Okay. It same principles apply. Yeah. And, yeah, the generation there, I I believe that size of generator would go through the two forty eight process regardless on its own, just the generator. Right. So I would not get But, yes, and in that process, if there's associated distribution or transmission upgrades necessary that, facilitate reliable, safe interconnection of the generator, those would be part of the generator has to pay for that, and so the cost cover pays.

[Rep. R. Scott Campbell (Vice Chair)]: And what what I was getting at was commissioner's point about RNS impacts, regional network Service. Impacts. Presumably, that would be covered by by that as well. Is that true, or is there is there sort of a limit to how I

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: I think there is ripples go. Yeah. There there is a limit to how far it goes. I think it's the the direct impacts to safely get the power out, but then ISO New England looks at the regional needs and power system flows. Yep. I think you'll hear a little bit of that from Velco this this afternoon or this week. But and and then they say, okay. Now a new project this caused a new project in New Hampshire to need to be built or load as such, and you can't really ISO doesn't pay peg that on one particular load. They say load altogether.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Yep. But even more TJ is exactly right. What I would say represent Campbell, there's there's two things. One is, okay. We're gonna need these these additional wires, these additional assets to actually safely interconnect your power. Okay. You gotta pay for that. Right. But there's also once it's in service, there's a cost that is reflected to keep it, like, in maintenance and think of it as overhead. And that isn't just that one customer. So you're generally just like we're talking about, you're raising the price for wholesale power, you're generally raising the overall cost just to keep the system running. So in addition to the build cost, there's this ongoing operational cost because it becomes part of the 5 or $6,000,000,000 annual cost to run the region's grid. Maybe it's 8 now. Hey. Yeah. Just to be clear, so there's two That's

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: exactly right. Thank you. You're welcome.

[Rep. Kathleen James (Chair)]: Do have a question,

[Rep. Christopher Howland (Member)]: Yeah. So what happens if you bring your own power? You have a demand of 25 megawatts. Mhmm. But you have a low 80% load factor, so you got five megawatts left over. Do they rate 70 doesn't talk about energy going back to the utility, but that require some sort of contract or it it's a to bring your own Mhmm. Doesn't mean bring most of what you need, but don't bring all of what you need.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: I think that the the power going out would just be they could either one contract with the utility for it or they could just enter it into the wholesale marketplace, right? And so there would be a

[Rep. Christopher Howland (Member)]: couple of options They for would then be their generator also, the two contracts.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: But to to his point, I would I would view it much more likely, I think, you talk to global foundries now that they understand, boy, when you're your own utility and player and all the paperwork and stuff that happens, My my guess, the representative Howland in that instance, they would much prefer to deal with the with the utility. Just have a straight transaction. It will provide these megawatts, give you a heads up. Here's when we're gonna be able to deliver power and or if it just comes, here's what we'll do between us so they don't have to get into the power supply market, the regional, do all the stuff that's required. Yeah.

[Rep. Laura Sibilia (Ranking Member)]: Clarification. Yeah. Mhmm. So in that instance, are we still talking about having on-site generation?

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Oh, I think that's what we were talking.

[Rep. Laura Sibilia (Ranking Member)]: That's okay. Right.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: This I'm if I

[Rep. Laura Sibilia (Ranking Member)]: wasn't Slightly different model than what we're seeing with global file trees is what I'm hearing. Oh. So, like, you would have well, that's a question.

[Unidentified JFO Analyst/Testifier]: Yeah.

[Rep. Laura Sibilia (Ranking Member)]: Right. Do

[Lisa Gobin (IT Consultant, Joint Fiscal Office)]: you understand what I'm asking?

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Yeah.

[Rep. Laura Sibilia (Ranking Member)]: So they're they're on utility right now.

[Unidentified JFO Analyst/Testifier]: Yeah.

[Rep. Laura Sibilia (Ranking Member)]: And what I think you're saying is we could improve upon that. So I'm hoping there's renewable generation on-site.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: I I would think And that's proven. If you wanna get to yes, you're gonna go with renewable generation in Vermont, if you wanna get to yes. It's likely what I was actually referring to since we have I know that Global Foundries saw and and credit to them saw great value from following the strategy that they did to be, their own, essentially, utility. But the full panoply of requirements from participating and becoming that, I'm just saying that if you become a generator and you wanna play in markets, right, they can skip over the local utility, you could do a deal with instead of do that. I would say most of the data in my judgment, most of the data says, okay. They would skew that much more complicated path and simply try and work an agreement with a

[Rep. Christopher Howland (Member)]: local utility. That's all. And if I could just

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: if we're talking about generation on-site and talking about we're it seems unlikely to me that we're gonna have enough renewable generation on-site in order to support like a more than 20 megawatt load of a of a data center, which if you think about it, if it's a really high load factor, so it's operating at 18 megawatts every hour, most hours, right, Okay. So that's maybe a 150 megawatts of solar in order to provide all that energy or, you know The battery. Yeah. Or or long duration batteries, maybe a little less solar with long duration batteries or it's a big that that's a big, scope of a project. Right? Maybe they site on the Connecticut River next to a day out. Interesting. Right? So there there's definitely other options, but I you know, when I think about it, I'm like, okay. Well, they're not gonna put up are they gonna site in Lowell under the turf? I I don't know. That would that brings up a whole host of other issues, orderly development and etcetera. So it's it's hard for me to envision a it being on-site renewable generation as opposed to maybe I'm gonna we're gonna build this new plant somewhere else that's renewable to directly support this. But I I don't know. Maybe my imagination might not be broad enough, but I just I just wanted to kind

[Rep. Christopher Howland (Member)]: of throw that out there.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Well, I would just would add, madam chair. No. I think you're hydro. That's exactly where I went, something like that. That might or the more I think about this, practically speaking, where might they go? I think you heard from GMP, as I heard, it was, well, we could go somewhere in in Southern Vermont. Mhmm. Really, for for me is, given there's other higher costs in operating Vermont, where might you save money? Seems to be, okay, Vernon, where you have existing electrical infrastructure. You have upgraded railroad siding. You have some of the assets in place that might buy down the cost you would have to incur from other places. If it were to happen, and I've seen nothing yet that says it will, but if it were, to me at least, that's the most likely place that we're talking about in

[Rep. Laura Sibilia (Ranking Member)]: response to your question. Mhmm.

[Rep. Kathleen James (Chair)]: So, you know? Yes. I have a final question, which is that hearing your testimony and hearing what feels to me like some gaps or moments of pause, like, know, ISO has some things that aren't quite ready. And our regulatory structure is pretty good, but there's some things we need to shore up. I wonder, and this isn't the direction this bill contemplates, but, you know, we need to have a technical conference. I wonder about the idea the other idea that's been kicking around, which is just a moratorium. You know, I that we wanna get the New England states together, and we're not together. So why not just put a moratorium on these in Vermont until we can get our until we can get ready and make sure that if one ever wants to come here, it has no negative impacts. Because I'm just I'm super concerned Right. About the negative impacts.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Thank you for the question. It's an absolute legitimate question. But to be clear, I think what both TJ TJ and I said was we view the existing regulatory process as absolutely sufficient, that they could adequately protect Vermonters. Does that mean that there

[Rep. Kathleen James (Chair)]: is No, I'm just not sure if I agree.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: I'm just, and I apologize, but I'm just trying to make sure, I wasn't sure if you were recapitulating our test our testimony. It for what it's worth is we think these are sufficient. We don't think just if you're gonna try and get to yes in Vermont building a data center, there's there's not gonna be any free lunch.

[Rep. Christopher Howland (Member)]: And there

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: and every I think there's adequate protections. ISO is on it, but they take time. So you're right about that. I guess at least my reaction to a prohibition is I don't want a 100% I think we have sufficient capacity here. Since I've been doing this now for about a year and two months, I keep looking for ways that we can try and change the equation for what I see happening that in the longer term trends we're on. There's there's risk associated with data centers. There's no question. But I also think it does there's there's not a whole time there's not a whole lot of opportunities and options for Vermont to grab some additional value to be able to build the grid we need to meet the res and other requirements we have if only Vermonters are paying for it. And it'll still be difficult if it's just Vermont and New England ratepayers are paying for it, given the other costs are coming at the region. So I at least see the opportunity to and other states have experiences, maybe share the negative situations, but I've also heard positives, and now some of it some of it is negative, but Georgia, Kansas, other places where they have leveraged data centers to get the kind of infrastructure built that otherwise just would have been a a cost solely borne by ratepayers. And if you put it all together, the possibility of value, the likelihood that we'll get something, primarily first the safety net, I would say, in the sufficient regulatory proceedings, kind of where we're at, which I think is a very positive place, the interest of this committee, and thank you, and data centers read these things, they're looking at where are we wanted. I mean, they're not looking to parachute into a hostile territory and try and take stuff over. I would just prefer we adopt the approach where it isn't just no, it is understand what we have these existing and we continue to move and improve our game as we need to and continue to learn from the region. I don't I I I'm trying to think of other jurisdictions I'm aware of that are pursuing prohibitions. The only places that I've seen actual pro well, no. It's not true. There are some states that are pursuing prohibitions. I just I if the committee wants to go there, fine. I just for our I would say our department's position is we would prefer not

[Rep. Christopher Howland (Member)]: to go that way. So

[Rep. Laura Sibilia (Ranking Member)]: are you saying we need nothing? We need improvements to the bill?

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: What I'm saying is, as we said right at the outset, we have sufficient, but could they may improve? Yes. Just to make absolutely I think every stakeholder involved in these kinds of issues would benefit from the type technical conference and then whatever comes of that. I think the legislation, some of the things you're talking about, and especially with bring your own generation and the clarity around some of that, here's the if you're gonna have, like, a what did we call?

[Rep. Laura Sibilia (Ranking Member)]: What was that term?

[Rep. R. Scott Campbell (Vice Chair)]: Oh, man. I need it.

[TJ Poor (Director, Regulated Utility Planning, Department of Public Service)]: Large load service equity contract.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Large load service equity. What should be the components? What should comprise the elements of that?

[Rep. R. Scott Campbell (Vice Chair)]: I think that could be that could

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: be a logical statute. Just as we're getting going, because we could pull off the technical conference. Hell, I mean, that could happen, like, in May or or or June. Let's get going. Ed totally agrees. Love the idea. Let's get going on that. So I'm not saying we're gonna hold off if anything. I wanna continue to make reasonable progress, continue to co collaborate with the states. So that's why I say in in in lieu of a prohibition.

[Rep. Laura Sibilia (Ranking Member)]: That's it. Torre, I was just curious. Would we need an appropriation to do the technical comment sort of factor in existing ASCs?

[Rep. R. Scott Campbell (Vice Chair)]: That's great question.

[Rep. Laura Sibilia (Ranking Member)]: We have a blood your letter.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: Yeah. We're asking It for

[Rep. Laura Sibilia (Ranking Member)]: sounds rather involved. No. It it

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: let me be candid, okay? Yes, it will evolve at the expense of resources. I've been, I think as you heard from TJ's and my testimony

[Rep. Laura Sibilia (Ranking Member)]: You're doing it anyway.

[Carrick Johnson (Commissioner, Vermont Department of Public Service)]: We're essentially doing it anyway, and honestly, I would view this as a preemptive investment in that we either invest some of our time and resources now in this way for a technical conference to continue to do the work at the regional level, or we can spend a whole lot of money, right, having to respond and us hiring lawyers to respond and do the like. So great question. Thank you. And fundamentally, our budget ask is baked, and I'm not really in a position to ask for any more of my you for asking the question.

[Rep. Kathleen James (Chair)]: Thank you so much for your time. Really appreciate it.

[Rep. R. Scott Campbell (Vice Chair)]: Yeah. Thank you for the

[Rep. Laura Sibilia (Ranking Member)]: this is good. Alright. Great. Thanks. We can go off live.