Deepwater/Grid agreement staking out uncharted waters; PUC island hearing January 5

Mon, 12/21/2009 - 5:00am

12/19/09 — Last week, Deepwater Wind announced its agreement with National Grid, but it will not be building an eight-turbine wind farm three miles off Block Island soon. Nor is it known how the project will affect the island’s electric rates. First, the Rhode Island Public Utilities Commission must approve the project using an untested legal standard. Under a state law passed last summer, the PUC will determine if the project is “commercially reasonable.”

“This is all new territory,” says the PUC’s senior legal counsel Cindy Wilson-Frias.

Under the 20-year contract announced last week, National Grid will initially pay 24.4 cents per kilowatt-hour for Deepwater’s wind power. The price will increase 3.5 percent every subsequent year. National Grid currently pays 9.2 cents per kilowatt-hour for power produced from coal, natural gas and nuclear plants, but state law requires the company to dramatically increase the percentage of power produced from renewable sources by 2020, making the Deepwater project economically viable. Should the eight-turbine project succeed, Deepwater hopes to build an additional 106 turbines 15 miles from Block Island.

Friday December 11, a dozen lawyers met at the PUC’s Warwick office to schedule hearings on the proposed contract and discuss possible roadblocks to its speedy approval. Wilson-Frias announced the process will begin in January with four public hearings, including one public comment hearing on Block Island on January 5, from 11:30 a.m. to 1:30 p.m. Then the PUC will hold formal hearings, with expert testimony and legal arguments, March 9-12. Finally, the agency will issue a decision March 30.

After the meeting, New Shoreham’s team of representatives said they had not fully examined the new contract, but their initial impressions were positive. Town Solicitor Katherine Merolla, outside counsel Alan Mandl and energy consultant Richard LaCapra, are monitoring the PUC process, they say, but expect a separate rate case to determine Block Island electric rates. However, Merolla commented that, “It’s too early to know.”

The proposed contract does not include costs for a key project element: an underwater cable to bring electricity to Block Island and the mainland. Paul Rich, Deepwater’s chief development officer, says his company and National Grid hope to complete plans for a cable by February and then have the PUC consider them together with the power purchase agreement. The cable’s cost and how it is apportioned between Block Island and mainland residents will have a major impact on the island’s electric rates.

Deepwater wants a quick approval of its project, Rich says, to make sure turbines can be manufactured on time. U.S. manufacturers produce turbines for land-based projects, Rich relates, but only Denmark, Germany and China make marine wind turbines. If numerous European wind projects under development place their orders before Deepwater, he said, the project might be delayed years as manufacturers work through a backlog of orders. A PUC decision by April 1, Rich says, should avoid that problem.

Nevertheless at last Friday’s meeting, Deepwater attorney Joseph Keough Jr. and National Grid lawyer Ronald Gerwatowski worried that appeals may delay construction. Under state law, Wilson-Frias says, anyone affected by a PUC decision may appeal to the state court system. The National Grid/Deepwater contract would affect electric rates throughout Rhode Island, so any citizen could appeal a PUC decision

The case will be complicated by the number of interveners, including Block Island summer residents Michael and Maggie Delia of New Jersey. The Delia’s attorney, former Warwick state senator Joseph McGair, describes the couple as “very principled people who are very interested in their investment in the island.” At an August public meeting with Deepwater officials, Michael Delia questioned the project’s impact on the beauty of Block Island.

Other interveners include the town, the Block Island Power Company and the Rhode Island Building and Construction Trades Council, a union group whose members could help build the project. The Conservation Law Foundation, a Boston-based environmental group concerned with global warming, and the Rhode Island Economic Development Corporation, a quasi-state agency that promotes economic growth, are also interveners. Finally, the Rhode Island attorney general’s office, represented by Jon Hagopian, and the Division of Public Utilites and Carriers, will represent the public.

In addition to the Block Island hearing, public hearings will be held in Warwick, Pawtucket and Narragansett. No dates have been set.