BREAKING NEWS: PUC approves wind farm contract

Wed, 08/11/2010 - 6:30pm

8/11/10—The Rhode Island General Assembly made us do it.

With that reasoning, the Rhode Island Public Utilities Commission approved the Deepwater Wind project to build six to eight turbines three miles off Block Island to generate wind power.

After the decision, Rhode Island Attorney General Patrick Lynch said he would ask the Rhode Island Supreme Court to reverse the ruling because the law making the project possible is unconstitutional. The Conservation Law Foundation vowed to do the same.

Governor Donald Carcieri, a driving force behind the wind farm project, lauded the decision and “the commissioners for their robust and comprehensive review of the agreement. This approval marks a critical step in our bid to develop the nation’s first offshore wind project. More so, this project will jump start a new industry in Rhode Island.”

Approval came on a series of 2-1 votes, with Commissioner Mary Bray opposed. The ruling came after two weeks of hearings. In March, the PUC unanimously rejected a similar contract saying it was not “commercially reasonable,” because it would be dramatically more expensive that conventional electricity produced by natural gas, coal and nuclear plant. The legislature responded in June by approving a new law governing the project that expanded what the commission was to consider, and provided a definition of “commercially reasonable.”

In the first year of the proposed wind farm’s operation, Deepwater will receive 24.4 cents per kilowatt-hour for power produced under the Power Purchase Agreement with Rhode Island’s principal conveyor of electricity, National Grid. The figure would rise by 3.5 percent annually during the life of the 20-year contract. Current electricity costs about 9 cents per kilowatt-hour.

At Wednesday afternoon’s meeting in Warwick, the PUC addressed four questions concerning the Deepwater project. The first was whether it was “commercially reasonable.” Under the new definition of term enacted by the legislature in June, Chairman Elia Germani said, the project was commercially reasonable because its cost would be similar to European wind projects of similar size and location. Commissioner Paul Roberti agreed, but Bray did not. She cited testimony on provisions of the contract that experts hired by project opponents said unjustly benefited Deepwater.

A key argument of attorney Michael McElroy, who represented two large manufacturers whose electricity bills will increase as much as $300,000 a year under the proposed contract, was not mentioned. McElroy noted that the $40 million price for laying an underwater cable from Block Island to the mainland was not included in price estimates. When it is included, he noted, the Deepwater project is much more expensive than similar European contracts.

The second question involved a cost reduction provision of the new law. The provision states that if construction costs are less than expected, the savings would be split evenly between ratepayers and Deepwater. During the hearings, Deepwater and National Grid said the estimated project cost was $205 million, but opponents said it was $219 million as cited by Deepwater in the prior PUC hearings. Germani and Roberti said the $205 million figure should be used because expert witnesses said the project would not secure a high enough return on investment to attract investors if the project price was $219 million.

Bray disagreed, noting that the $205 figure surfaced during recent PUC hearings for the first time. She also highlighted that an email from Deepwater CEO William Moore to a legislative committee used $220 million. “It appears someone was not forthright with the legislators and the commissioners,” she commented, although later in the discussion she stated that she was not implying any wrongdoing.

The third question involved the economic benefits of the project. Predicting the issue was likely to be decided by the Rhode Island Supreme Court, Germani stated that “the net benefits test” did not apply in the Deepwater case because the legislature clearly knew the project would increase utility costs when it passed the legislation to push the project forward. Roberti agreed saying McElroy’s clients, Toray Plastics and Polytop Corporation, had not argued that higher utility prices would force them to close, only that it would raise their costs.

“This is the legislature’s policy,” said Roberti, noting that it was similar to Congressional passage of the Clean Water Act that increased Narragansett Bay Commission sewer fees. “It’s not our call to make that it’s bad policy,” he summarized.

Bray countered that the project would increase utility costs by $370 million over the life of the 20-year contract, but Roberti replied, “The legislature is picking one section of economic expansion against another.”

Finally, the PUC unanimously agreed that the project had clear environmental benefits, notably the elimination of diesel generators on Block Island.

A written decision is expected Monday. After the ruling, former state Senator Joseph McGair, attorney for a group of North Kingstown and Block Island residents opposed to the project, said it was too soon to decide whether to appeal. McElroy stated, “I have to talk to my clients.”

Lynch, however, came out firing, promising an appeal. The legislation passed in June made the PUC, with the exception of Bray, “a kangaroo court,” he said. The legislature decided, he continued, “Let’s give $200 million to one company because they say they can help us.” Finally he called the Deepwater law “a sweetheart deal” that will “kill the business climate just so some friends of theirs can make a couple million dollars.”

By clearly applying to just one company, Lynch explained, the law is unconstitutional.

Tricia Jedele, executive director for the Conservation Law Foundation, said the decision left “CLF with little option but to appeal” in the state Supreme Court.

Jedele said she was not surprised with the vote because “the results were dictated by the law itself.” She said that the new law “defined so narrowly” what the legislature expected from the PUC that “it could only have one intended outcome.”

After its decision, the PUC dismissed motions by the CLF, Lynch and TransCanada to dismiss the modified contract.

“Unchallenged, this law and decision sets a precedent that undermines efforts to create” a level playing field for renewable energy for Rhode Island, said Jedele.

A written order is expected August 16, and appeals are due by August 23.