National Grid responds to Deepwater claims

Mon, 10/26/2009 - 6:30pm
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10/24/09 - Madison Milhouse, Jr., director of Wholesale Market Relations for National Grid, wrote a letter to Deepwater Wind CEO Bill Moore October 21, seeking clarification of Moore’s comments made since National Grid filed an unsigned power purchase agreement with the state Public Utilities Commission last Thursday.

National Grid “read with interest reports in the news media that you believe that the price for the power would be between 20 and 25 cents per kilowatt-hour, as compared to the price of 30.7 cents per kilowatt-hour, in the first full year of operation in 2013. We were surprised to see this quoted price, since we do not recall actually receiving a pricing proposal from Deepwater … that reflected such pricing,” Milhouse writes.

The letter goes on to say, “while 20 to 25 cents per kilowatt- hour is still significantly above the pricing Deepwater submitted to the state in 2008 and remains substantially above expected market prices, it is at least a step in the right direction.”

Milhouse goes on to ask Moore to confirm the offer as “a true fixed price.” Once in receipt of the confirmation, Milhouse says he would arrange for the two parties to resume negotiations.

In last week’s filing, National Grid said that while being the first state in the nation to create an offshore wind farm was a worthy goal, “The aspiration to reach this goal needs to be tempered by the reality of cost.”

National Grid suggested that the cost — which it estimated to be 30.7 a kilowatt-hour when the current average is about 9 cents — was far too high.

Grid wrote that Deepwater’s proposal, “in pure financial terms, is uneconomic by a significant margin for Rhode Island customers for the entire term.”

National Grid estimates it would pay Deepwater a total of $657.5 million over the life of the 20-year agreement. Of that, the Grid expects $500 million will be above market costs. “In the first full year of operation… expected 2013, the above-market cost to customers will exceed $16 million and continue to escalate,” National Grid counsel Ron Gerwatowski wrote.