Deepwater says cable will cost less than diesel fuel
07/11/09 - Block Island residents can expect lower electricity bills, even after chipping in for a cable to the mainland, Deepwater Wind officials said Monday.
Executives from the offshore wind farm developer met Monday with the town’s Electric Utility Task Group to detail a plan that would connect five to eight wind turbines to the island and the mainland. A cable between the mainland and island holds potential to deliver electricity to the island at rates close to those on the mainland.
But someone needs to pay the roughly $20 million to $30 million to construct the cable. A state law, adopted last month, would spread the cost among thousands of mainland electricity customers and roughly 1,700 island customers. The law also requires Block Island customers to shoulder proportionally more of the cost of the cable than mainland customers. Lawmakers apparently felt that if Block Island customers were receiving the primary benefit from the cable, then they should pay a higher percentage of the cost.
But Deepwater Managing Director Jim Lanard said the new cost associated with paying for the cable — the “transmission charge” — would almost assuredly be lower than the fuel charge it would supplant. In May, the fuel charge was 15 cents a kilowatt-hour, or $75 a month for an average household using 500 kilowatt-hours.
A transmission charge for the cable would be about 38 cents a month for mainland customers, according to estimates furnished by National Grid, the likely future owner of the cable, Lanard said. The law requires Block Island customers to pay more than that, and while Lanard could not offer a specific number, he guessed it would amount to far less than the total fuel charge. Even if island customers paid twice as much, the charge would still be under $1 a month, he said.
The state Public Utilities Commission would set the final transmission charge after a hearing involving the yet-to-be-determined owner of the cable. The PUC would be expected to look at the actual cost of the cable, its maintenance and the economic impact of the rate on mainland and island customers.
The PUC as the final arbiter did little to settle concerns of task group members, who recalled bitter battles the town waged against the island power company.
“It is not always clear from our standpoint that the PUC always takes into account the concerns of the community,” Everett Shorey said.
Bill Penn expressed irritation at the General Assembly for crafting legislation that forced higher rates on Block Island customers without constraints. And he complained the task group learned of the law only after it passed. (The bill received extensive coverage in both the Times and national media.)
“I don’t see any footprint of the Block Island community in here,” said Penn while thumbing through the law.
From the audience First Warden Kim Gaffett said she and other town officials had been involved in the legislation’s creation and lobbied for Block Island issues. And Lanard and fellow Deepwater Managing Director Bill Moore noted that an entire page deals specifically with the “Block Island project” and a requirement that it connect the island to the mainland. Lanard also said that Deepwater supported a clause that required the connection to the mainland, ensuring that the wind farm would benefit New Shoreham. (Another, larger farm with about 100 turbines 15 miles to the east would be a completely separate project.)
Plus, Lanard said, lawmakers passed the law under the auspices of economic benefit and it would make little sense for the PUC to allow contracts that increased utility rates.
And from the audience, Block Island Power Co. owner Cliff McGinnes Sr. called the project “one of the best things that’s happened to the island in a long time.”
BIPCo stands to gain significantly from the project if a cable linking the island and mainland becomes a reality. BIPCo could eliminate its costly diesel generators and instead purchase electricity from the mainland electric grid, New England ISO. Although in a technical sense electricity from the five to eight turbines off the southeast coast of Block Island would power the island, on paper BIPCo would purchase the electricity from the mainland.
That’s an important distinction, Deepwater executives said, because electricity produced by the wind farm would come at a higher cost than electricity from, say a coal or gas plant. But when the wind farm electricity is fed into the grid, the extra cost is spread among hundreds of thousands of customers and adds just fractions of a penny to bills.
The system also spreads out the “bonus” that the law provides to National Grid in return for signing a potentially risky contract with Deepwater. Under the law, National Grid will collect an amount equal to 2.75 percent of the annual contract with Deepwater from all of its customers. What that will translate to in dollars is unknown until Deepwater and National Grid sign a contact.
The public will have a better understanding of those numbers in the fall. The law requires National Grid to solicit proposals for renewable energy contracts by August 15 and receive them by October 15. Deepwater executives said they plan to submit a proposal. The law then requires the PUC to approve a contract between the pair by December 31.
Until then, Moore, from Deepwater, said he was being intentionally vague about how much electricity from the wind farm would cost because releasing the information could hurt the company’s negotiating position. Lanard added that the number is almost meaningless because BIPCo would buy its electricity from the regional grid and not directly from Deepwater.
“We want to give you as much info as we could but we are handcuffed because we’re not the party supplying your power,” he said.
In other business, the task group met with town solicitor Katherine Merolla to discuss ways the town could construct and operate a land-based wind turbine. Merolla told the group — which has been asking her to attend a meeting for months — she needed a clearer picture of what it wanted to accomplish before offering advice.
Merolla wanted to know who would own the turbine, who would operate it and if the electricity would be sold directly to customers or to BIPCo.
“You tell me what you want to do then I’ll make it happen,” she said.
Task group members agreed they needed to refine their proposal.
Penn suggested a scenario in which the town leases public property to a private company that would in turn construct and operate a wind turbine. In return for an exclusive agreement with the town, the company would agree to pay for a feasibility study.
While task group members agreed to mull the idea, Shorey worried such a configuration would leave the town little control over the company’s operations. And Barbara MacMullan worried that profits sought by the company would eat away at any savings.
Merolla, though, cautioned that any effort by the town to operate a wind turbine and sell the electricity would likely require a new state law.