Price stability a potential plus of wind farm, cable

Mon, 09/21/2009 - 4:00am
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09/19/09 - Bringing price stability to Block Island electricity ratepayers is perhaps the biggest potential upside to the proposed wind farm and cable, members of the Electric Utility Task Group agreed Monday.

“Not a small benefit,” said member Barbara MacMullan.

MacMullan, joined by Everett Shorey and Bill Penn, said that ending the volatility of Block Island electricity costs, brought on in large part by swings in the cost of diesel fuel, would be a worthwhile benefit for both businesses and residents alike.

Deepwater Wind is proposing eight wind turbines within three miles of Block Island’s southeast corner. A cable would connect the island to the farm, and another cable would connect the island to the National Grid. A major selling point of the project is that Block Island ratepayers could see their electricity bills fall to levels similar to what mainland customers pay.

Penn pointed out that last summer the island’s rates reached a national high of 65 cents per kWh, and businesses were faced with “disaster” in the shape of $45,000 monthly bills, which he said was not sustainable.

According to new town consultant Richard La Capra, who met with the task group for the first time Monday, National Grid prices range from 7.5 cents to 11.5 cents per kWh.

Would bills change?

MacMullan offered her own estimate of how island electricity bills could change if a cable were in place, based upon BIPCo’s historic fixed costs charge of 18 cents per kWh, and the current fuel surcharge of 19.6 cents per kWh, for a total charge of about 38 cents per kWh.

In MacMullan’s calculation the 18-cent per kWh non-energy charge for distribution, overhead and general administration would remain unchanged, while the 19.6-cent per kWh energy charge would be replaced with a 7.5-cent per kWh wholesale electricity cost from National Grid, resulting in savings of about 12 cents per kWh.

However, MacMullan pointed out that there would likely be an added transmission charge, a monthly charge for the cable, as well as any new charges stemming from BIPCo’s stranded, or “transitional,” costs. The net savings would be about 8 to 10 cents per kWh — “not an insignificant savings,” she said.

Baute pointed out, however, that the last BIPCo billing reflected a nearly 50-cent per kWh charge, so the savings would be higher.

McGinnes also guessed that BIPCo’s overhead costs could be lower, depending on how many generators the Public Utilities Commission requires the company to maintain as backup.

And Penn pointed out that if, for example, the cost of fuel were to skyrocket to $150 a barrel, then the savings would be vastly higher.

Cable costs

The group spent some time discussing what a proposed cable to the mainland would cost island ratepayers. In recent legislation the General Assembly included language calling for Block Island ratepayers to pay proportionally “higher charges” for the cable in their monthly bills than National Grid’s mainland customers.

The logic behind this stipulation has bedeviled task group members, but Monday they agreed that if the number was kept in cents — and ideally between 38 cents (which mainland grid payers would pay) and 40 cents per month — the burden would be reasonable enough that they would not pursue changing the legislation.

Faced with such a monthly charge, Shorey said, “we should be reasonably happy.”

La Capra agreed, but pointed out that traditional rate design models would have to be utilized to arrive at that cost.

MacMullan pointed to the difficulty of creating such a model, because in her calculations based upon the number of island customers and the amount of energy they would use, a monthly charge of 16 cents to 26 cents would be more appropriate.

“Don’t make it complicated,” said Town Council liaison Peter Baute. He suggested settling for a simple percentage more, which “gets it done” in terms of the legislation.

Shorey said that the town should not leave the cable cost allocation figure to be decided by the PUC; rather, the town should be proactive and come up with a number and rationale, ideally in agreement with BIPCo, to present to the PUC.

McGinnes agreed with this approach.

McGinnes added that “the governor did the island a favor” by calling for a cable from the farm to the island. “A lot of work was done behind the scenes” to include the island, he said, as the cable “could’ve gone to Narragansett just as cheaply.”

“Politics is driving this thing,” McGinnes added. “It’s all about being the first.”

Still, the task group members maintained that while the cable and farm would benefit island ratepayers, the primary purpose of the cable was to deliver Deepwater’s wind to the grid.

Shorey said, “it’s important to keep in front of the PUC — we’re taking all the community risk.” He pointed out that the majority of the jobs generated from the project would go to the mainland. He reiterated that Block Island was one of the few communities on the East Coast to “put up its hand” to accept such a project.

“In a sense we’re taking one for the state,” he said.

McGinnes said that the PUC was not likely to schedule the matter for its agenda until at least December.

La Capra said that National Grid was unlikely to take a position on how much island residents should pay for the cable, and Deepwater is on record as suggesting no more than a penny more than the rest of the grid customers.

Distribution update

McGinnes provided the group with a rough estimate of how much it would cost to update BIPCo’s distribution system. Currently it is estimated that 14 percent of the company’s output is lost due to line loss.

The cost estimate to improve the system by 3.2 percent was $250,000, which McGinnes said “sounds like a lot of money for so little reduction.” The company’s board had yet to consider the document, he said.