April 18, 2019

GMP, GlobalFoundries agree on power deal

GlobalFoundries and Green Mountain Power announced Tuesday a multi-year agreement on more stable energy costs.

Representatives of the microchip manufacturer, which acquired the former IBM site in Essex in 2014, have said that predictable energy costs are a key to keeping the plant operational. The company employs about 2,500 people at the facility.

“Our hiring trajectory is increasingly constrained by external factors such as electrical costs, which remain over 84 percent higher than those in our sister site in Malta, New York,” GlobalFoundries Spokesperson Steve Grasso said in June, after the company laid off an unspecified number of workers. “To support a long-term future at this location, it is critical to secure a more competitive and predictable cost structure from local utilities.”

GMP provides among the lowest cost energy in New England, but regional power costs outside of GMP’s control are still significantly higher than in neighboring New York, which operates through a different grid system, according to a company press release. These costs increase expenses for many organizations, including GlobalFoundries.

“This agreement is great news for GlobalFoundries and great news for Vermont because it provides stability and predictability for the company, while ensuring our customers continue to receive cost-effective and highly reliable energy,” said Mary Powell, president and CEO of Green Mountain Power. “The positive economic impact of GlobalFoundries’ presence in Vermont is significant, and we feel strongly that we, along with our state partners, should continue to do what is reasonable and responsible to support keeping these important manufacturing jobs here in Vermont.”

GlobalFoundries is GMP’s only “Transmission Class” customer, which means it does not use the GMP distribution grid used by all other customers. Instead, it maintains its own distribution grid at its Essex location. The agreement lowers GlobalFoundries’ electric rate by 2.73 percent starting in January and freezes that through September, 2022.

In exchange, GlobalFoundries agreed to maintain its power use on site, and forgo credits or rate cuts flowing to other GMP customers during this time, including tax reform credits of over $27 million that GMP will return to customers next year. GMP and GlobalFoundries also agree to work together to draw more business to the unused part of the former IBM campus to further strengthen the economy, and to promote new energy use onsite.

“We face global competition from facilities that pay significantly less for electricity than we do in Vermont,” said Dale Miller, GlobalFoundries’ Vermont senior location executive. “As the state’s largest manufacturer, we consume more electricity than any other single customer, and energy costs are determinant of the competitiveness of our operations in Vermont.

“Vermont’s energy policy and GF’s ability to purchase competitive energy in the state will factor into future investment decisions. We greatly appreciate the efforts of the state, economic development leaders and GMP to support our Vermont facility, and will continue to work with them to strive for competitive energy costs in Vermont.”

 The plan is subject to review and approval from state regulators

“This is a great example of teamwork to support an important employer in our state,” said Lisa Ventriss, president and CEO of the Vermont Business Roundtable. “As we look to new and creative ways to encourage businesses, especially manufacturing, we must find solutions like this to address areas where we are not as competitive with our neighbors. This is truly a global economy, and businesses have choices.”

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