MONTPELIER, Vt. — The state Public Service Board on Friday announced it would fine Vermont Gas Systems $100,000 for its slowness in reporting the first of two big cost increases on its pipeline project to extend its system down the state’s western side.

Vermont’s only supplier of piped natural gas announced 13 months ago its budget for the project had grown from $86.6 million to $121.6 million. The board later found the company had waited nearly six months before disclosing the need for that increase. Since then, the project cost has grown to $153.6 million.

The board’s order said by waiting to disclose the increase, “…VGS failed in its obligation of transparency, thereby undermining the effectiveness of the regulatory process and creating mistrust in that process among members of the public.”

JUST SHY OF A MAXIMUM FINE

Donald Rendell, who joined Vermont Gas as president in January, said in a statement the group will comply with the order.

The fine was $9,000 shy of the maximum the board could impose under its rules, and was nearly three times the $35,000 penalty requested by the state Public Service Department, which represents consumers before the board. The department is part of the administration of Gov. Peter Shumlin, who has been a strong supporter of the pipeline project.

“The decision shows that significantly higher penalties are justified. It’s disappointing the department didn’t seek higher penalties,” said Sandra Levine, senior attorney with the Conservation Law Foundation, one of several groups opposing the pipeline project.

Department Commissioner Christopher Recchia said the department had requested a fine near the $40,000 maximum for a one-time violation and had told the board it could impose more if it found a continuing violation. The board found Vermont Gas “had reason to believe” it would need a budget increase of more than 20 percent in January of 2014, six months before its July announcement.

COST UP 80 PERCENT

The board approved the first part of what was originally planned as a three-phase project in December of 2013, but since then that first phase – extending gas service from Colchester to Middlebury – has seen the nearly 80 percent growth in its projected cost. It also has seen much more vocal opposition – and acts of civil disobedience – from activists who say Vermont should not increase its reliance on fossil fuels at a time of concern about climate change.

The second increase in the project budget was announced in December, and the board now is considering whether to re-open the question of its 2013 approval in light of the cost increases.

EXPANSION PROSPECTS DIM

Meanwhile, prospects for the latter two phases of the project have dimmed significantly. The second phase was going to be a pipeline west from Middlebury to Ticonderoga, New York. But Vermont Gas’ major prospective customer there, an International Paper Co. mill, dropped out in the face of the cost increases.

That puts plans for the third phase – a pipeline from Middlebury further south to Rutland – up in the air.

“Phase 2 was slated to make a contribution to the cost of moving south from Middlebury, and Phase 2 is no longer part of our plan,” Rendall said in an interview. He said he hoped the company could find another way to get natural gas to Rutland, but for now is focused on completing the project to Middlebury.