BIPCo: 'Things are changing'

Sun, 10/04/2015 - 8:00pm

The Block Island Power Company (BIPCo) and its stewards are facing uncertainties and questions associated with the installation of the $290 million Deepwater Wind Block Island Wind Farm and its attendant $107 million National Grid-owned and operated transmission cable system. Deepwater Wind has said that it plans for its five-turbine, 30-megawatt pilot wind farm project to be operational by the fall of 2016.

Despite the unknowns, BIPCo co-owner Al Casazza said during an interview with The Block Island Times on Monday, Sept. 28, that the cost of energy is going to be “lower and predictable. Businesses will be able to budget with the assurance that the price of electricity will be stable.”

Casazza said BIPCo will be utilizing a broker to purchase power from the energy marketplace. “It will be at less of a cost,” he said. “It’s going to be less than what it has been.”

Casazza provided a qualifier to his assertion, stating that BIPCo is “brand new” to the purchasing of energy in the marketplace. “We’re neophytes,” he said. “It’s not only new to the ratepayers. It’s new to us. We’ve never bought electricity in the wholesale marketplace. BIPCo has always generated electricity.”

Casazza said that ratepayers are presently seeing a reduction on their electric bills due to the lower cost of fuel. He also acknowledged that the utility company is facing many unknowns in transitioning to a distribution only facility, something that BIPCo has never been.

“The fuel charge is now about 20 cents per kilowatt hour, while the energy rate is 25 cents, bringing the total charge to 45 cents a kilowatt hour,” said Casazza. “We are looking at about a 27 percent, or 12 cent reduction off the current charge to bring the price down to 33 cents per kilowatt hour as estimated by the Energy group.”

According to Casazza, the big question for BIPCo is: How will the utility company purchase its electricity? “We have to get more knowledge,” said Casazza.

On Monday, June 15, National Grid spokesman David Graves told The Times that, “National Grid will be buying 100 percent of the power generated by the wind farm at 24.4 cents per kilowatt-hour, estimated in the first year of delivery, which is now 2017. That’s per the rate base of 490,000 electric customers in (mainland) Rhode Island, based on rates that were in place in October (2014).”

Graves said that what BIPCo charges its customers would be based on the rate that the utility is able to negotiate in the marketplace. He also said that the cost of the $107 million will be “spread across the entire Rhode Island rate base” and “means a projected increase of about $1.65 per month for a typical mainland residential customer.” This only applies to National Grid’s mainland customers, not ratepayers on Block Island. Graves said that, “National Grid has no say in what BIPCo charges its customers.” 

BIPCo revealed at an Electric Utilities Task Group (EUTG) meeting that it will have to pay approximately $500,000 to connect the utility company to the National Grid transmission cable system. Casazza said that he was “hopeful” that the cost for connecting to the transmission system might be reduced due to “new engineering” equipment and methods. 

According to information provided by the EUTG, Block Island’s 1,670 ratepayers will be expected to share some of the cost of the $107 million cable, which will be installed primarily to service island residents. National Grid’s 490,000 mainland customers will utilize most of the power supplied by the cable. The mainland’s peak energy load is more than 330 times the island’s peak (1,562.1 vs. 4.7), which means that the island will utilize less than 1 percent of the power generated by the wind farm’s turbines.

Due to these factors, Block Island ratepayers will pay approximately 1.5 percent of the cable costs. Because there are fewer island residents, Block Island ratepayers will end up paying more per year than mainland customers for the cable charge. Block Island ratepayers can expect to pay a projected $39.96 per year at $3.33 per month for the cable, while mainland customers will be charged approximately $19.80 per year or $1.65 per month.

Casazza said that BIPCo would be charging ratepayers a “nominal” amount to pay for the cost of connecting to the National Grid transmission system. He noted that BIPCo will be securing a 20-year loan to pay for the connection charge, and the cost would be spread out over that time period.

Casazza admitted that BIPCo would be seeking a “waiver” from the Rhode Island Public Utilities Commission (PUC) to continue to operate its diesel generators on the island.

“We had a meeting with the Division (of Public Utilities and Carriers) this past week, and everybody in the room thought it would be appropriate to keep the diesel generators,” said Casazza. “Each island that disposed of its generators has had to bring them back” for various reasons.

Casazza noted that Nantucket brought its diesel generators back after at first disposing of them. He said that the generators could come in handy if an event occurs where the cable is rendered inoperable, although National Grid and its engineers have contended that it is “unlikely” that the cable will falter due to an event.

In the case of an emergency, Casazza said, “It would take us (BIPCo) about twenty minutes to come online with our generators.”

During a Jan. 14 meeting at the PUC’s Warwick offices, BIPCo co-owner Cliff McGinnes, Sr. said that “we would have to start our engines and go online and supply the island with the necessary power.” McGinnes also said that, “We probably will be recommending to the Commission that we maintain all five engines ready to go until we have some type of history that might allow us to cut back, especially if ISO New England (Independent System Operators) is not interested in our peaking capabilities.” 

Casazza told The Times on Monday that BIPCo is “not interested in being a peaking unit until maybe several years” down the road. “We don’t have enough infrastructure, and we’re not looking for that infrastructure,” he said. 

Casazza acknowledged that some components of the wind farm project are foreign to him. He said each component of the wind farm has to be connected and operating for the project to be functioning efficiently. “The whole system has to be intact for it to work,” said Casazza. “The windmills need power from the mainland in order to run. So if the connection is lost, the windmills won’t run. Even if they could, we couldn’t take their load.”

BIPCo has no capacity, or battery configuration at its facility, to bank electricity, he said. So the utility would be unable to bank the electron flow coming from the wind farm during the time of peak output.

Casazza said BIPCo sold half an acre of land on its Ocean Avenue property to Deepwater Wind and National Grid for purposes related to the wind farm. National Grid will own and operate a substation on that property.

“The property was encumbered by a loan owed to the Rural Utilities Service, which is a department of the United States Department of Agriculture,” said Casazza. “A stipulation of the loan was that proceeds from selling the land must go toward capital improvements.”

Casazza said that a lot of things will be “changing” for the power company as it transitions from being a power generator to a distribution-only utility company. “The only constant is change,” he said.