National Grid rejects Deepwater proposalAsks PUC to disapprove contract

Wed, 10/21/2009 - 2:30pm
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10/17/09 - National Grid filed an unsigned “power purchase agreement” with the state Public Utilities Commission Thursday that calls Deepwater Wind’s suggested electricity price of 30.7 cents per kilowatt-hour “not commercially reasonable.” It asks the PUC to reject Deepwater’s proposed contract for the “Block Island Wind Farm” — eight turbines off the island’s southeast side.

National Grid’s document, which was mandated to be filed October 15 by state statute, says that Deepwater’s price proposals were “far higher than all expected.”

According to National Grid, Deepwater priced its electricity at 30.7 cents per kilowatt hour the first year, with escalations of 3.5 percent following each subsequent year. The document says that while Deepwater would take on all the construction risk, National Grid customers would take on all subsequent production and maintenance risk.

The cost does not include a cable from the island to mainland.

In a written statement released late Thursday, Deepwater CEO Bill Moore said, “National Grid’s decision to oppose the contract that we have been negotiating with them in good faith for the past several weeks is very disappointing.”

Moore said later in a conference call that Deepwater had proposed costs of 20 to 25 cents per kwh, and that another day of negotiation could have resulted in 19 cents per kwh.

According to Moore, National Grid would not accept any more than six wind turbines because of the costs attached to operating them.

“We will continue to take a flexible, open-minded approach to negotiating with National Grid, and invite them to return to the table,” Moore said.

The negotiations, which have carried out over the last three weeks, involved only the smaller “demonstration project” farm off Block Island. Without the the smaller Block Island farm, it would be difficult for Deepwater to pursue financing for its proposed Rhode Island Sound wind farm, which many wind farm proponents say could provide hundreds of new jobs in mainland Rhode Island.

“National Grid’s filing today puts those jobs at serious risk,” said Deepwater’s statement.

Moore said he hopes that the PUC orders the two back to the negotiating table.

Moore told a Block Island audience in August that the negotiated power price reached with National Grid would not affect the electricity bills of Block Island customers — Deepwater would be simply feeding into a pool of electricity that is National Grid. Block Island Power Company, it was explained, would reach its own agreement with National Grid for the cost of wholesale electricity.

However, the price of the cable from Block Island to the mainland would affect Block Island ratepayers.

The cable price has not yet been negotiated, said Moore. Technical conversations have been underway with National Grid’s transmission experts, he said.

Backwind

The wind farm projects stem from Gov. Donald Carcieri’s call two years ago for 15 percent of Rhode Island’s power to come from renewable sources.

A memo of understanding was reached between the state and Deepwater last spring.

Deepwater proposed two wind farms off Rhode Island.

The smaller of the proposed farms would consist of eight turbines placed within three miles of the Southeast Lighthouse in state waters that could generate a maximum of about 29 megawatts of electricity.

The larger project, with approximately 130 turbines, is proposed for state waters 15 miles east of Block Island; it would generate about 385 megawatts of power.

They would be the first offshore wind farms in the nation.

Both farms would require separate cables to deliver the electricity to the mainland.

The state General Assembly passed a bill last summer that was designed to facilitate an agreement between National Grid and Deepwater.

The Rhode Island Legislature made explicit its desire that Block Island ratepayers pay proportionally more to finance the cable than mainland grid customers.

National Grid expected the cable to cost approximately $30 million, which would result in a 38-cent a month charge for mainland customers, amortized over 20 years.

Deepwater has estimated the cable to cost $22 million.

The town’s Electric Utility Task Group initially challenged the caveat asking islanders to pay more, which it considered illogical and discriminatory, but determined that it was better use of the group’s time to help reach a reasonable electricity price for the island rather than work to get the legislation changed.

The task group meets this Friday at Town Hall at 2:30 p.m.