Rule 424(b)(3)
Registration No. 33-59383
Supplement, dated October 18, 1996,
to
Prospectus, dated October 3, 1996, as supplemented by
a Prospectus Supplement dated October 10, 1996
120,000 Shares
Green Mountain Power Corporation
7.32% Preferred Stock, Class E, Series 1
($100 par value)
On October 16, 1996, the Vermont Public Service Board (the
"VPSB") issued a Draft Report and Order (the "Draft Report") in its
Investigation into the Restructuring of the Electric Utility Industry in
Vermont. The Draft Report sets forth recommendations for restructuring
of the electric utility industry in Vermont which will require further
legislative action. The Draft Report proposes the commencement of
competitive retail sales of electricity by January 1, 1998, while
distribution and transmission functions would remain subject to
regulation. The Draft Report addresses industry restructuring issues,
including, among others, the provision of customer choice, division of
generation and distribution functions, treatment of stranded costs,
required use and development of renewable energy resources, national and
regional policies assuring environmental quality and establishment of a
regional independent system operator and power exchange system. The
Draft Report requests comment from interested parties by November 15,
1996. The VPSB will consider comments received from interested parties
and will thereafter issue a final report and order.
The Draft Report states that, rather than require complete
divestiture at this time, the VPSB would require Vermont investor-owned
utilities to divide their generation and distribution functions into
separate corporate subsidiaries in order to achieve a functional
separation. Associated rules would determine how such subsidiaries will
interact with each other.
The Draft Report proposes an approach which takes into account
multiple factors that the VPSB believes will "create the opportunity for
full recovery of stranded costs provided they are legitimate,
verifiable, otherwise recoverable, prudently incurred, and non-
mitigable," but the Draft Report also states the VPSB's belief that "an
opportunity for full recovery must be explicitly tied to successful
mitigation." The Draft Report further provides that where a utility has
successfully mitigated its stranded costs, the opportunity should exist
for substantial or full recovery of stranded costs when the magnitude of
the post-mitigation stranded costs, among other things, allows for rates
that are reasonably comparable to regional rates. The Draft Report
calls for a multi-step process which would involve (1) a rigorous
estimation of stranded costs (which in turn would require an estimate of
future power costs) and a determination of the extent to which stranded
costs can be mitigated, (2) an adjustment of stranded costs and (3) a
stranded cost reconciliation proceeding. The process would consider
each utility's estimate of stranded costs and the success of its
mitigation efforts on a case by case basis.
The Draft Report is not a final report or order concerning the
restructuring of the electric utility industry in the State of Vermont.
The Company intends to submit comments to the VPSB in accordance with
the schedule set forth in the Draft Report. The largest category of the
Company's stranded costs are future costs under long-term power purchase
contracts and the Company intends to comply with the steps outlined in
the Draft Report and aggressively pursue mitigation efforts in order to
maximize its recovery of these costs. However, the Company can give no
assurances that it will be successful in realizing mitigation of these
costs to the extent suggested by the VPSB or that it will otherwise be
able to achieve full or substantial recovery of these costs.
Thus, the Company cannot predict whether the Draft Report or
any subsequent report or actions of, or proceedings before, the VPSB
would have a material adverse effect on the Company's operations,
financial condition or credit ratings. However, the Company's failure
to recover a significant portion of its purchased power costs, or to
retain and attract customers in a competitive environment, would likely
have a material adverse effect on the Company's business, including its
operating results, cash flows and ability to pay dividends at current
levels.
