Wind farm process defended
01/22/11 - The process that led to the approval of the Block Island wind farm — bringing with it the potential for a new green industry in the state — should be “encouraged,” not derided, argue briefs filed Friday in the state Supreme Court defending the Deepwater Wind and National Grid power contract.
The briefs, submitted on behalf of the developer and the utility, as well as Speaker of the House Gordon Fox, Senate President M. Teresa Paiva-Weed, and the governor’s office, are a response to legal challenges mounted by former Attorney General Patrick Lynch, the Conservation Law Foundation and industrial concerns Toray Plastics and Polytop Corp.
Those groups alleged a number of legal and constitutional transgressions in the process that led to the wind farm contract approval.
Essentially, the objectors argue that a Public Utilities Commission decision is final — no second bites at the apple are allowed — and that the Legislature cannot rewrite the rules to force the agency to take up the contract again to reach a preferred outcome. Also, the companies say the price in the contract did not meet the “commercially reasonable” requirement.
In the wake of PUC’s March 2010 rejection of the first wind farm contract, the General Assembly rewrote the Long Term Contracting Statute. This new law called for the PUC to weigh a modified contract, which it approved 2-1. The objectors say the General Assembly and former Gov. Donald Carcieri violated separation of powers by essentially changing the rules to suit their desires.
The briefs filed Friday disagree.
Those supporting the wind farm contract argue that the PUC weighed two distinct contracts — rejecting one and approving the other — which is the normal course of business for the agency. Furthermore, there is nothing wrong with the Legislature creating a new law to better equip the PUC to review an offshore wind farm contract — one of the first in the nation. It is an example of legislative fine-tuning, a natural step in realizing a policy goal of establishing Rhode Island as a regional center for offshore wind.
Just because the PUC rejected one contract, the brief argues, “the policy-making process need not stop there, or energy policy would freeze in place.” Instead, the General Assembly moved forward “with its plan to transform Rhode Island into a hub for renewable energy development,” enacting new legislation that set new criteria for the PUC to use in reviewing a new contract.
“This dynamic interaction should be encouraged, not discouraged,” the brief reads. “If it takes several attempts by the General Assembly, the [PUC], the utility and the developer, that is good, not bad. The point is to get it right, not to preserve a failed proposal in judicial amber.”
The evolution of the process is also laid out: the executive branch — under Gov. Carcieri — issued a request for wind farm proposals, which seven developers responded to. The state selected Deepwater Wind from that “wide open field,” and signed a Memorandum of Understanding with the company. National Grid then issued a request for proposals for an offshore wind farm based upon criteria laid out in the state’s initial renewable energy law. Deepwater was the only developer to offer a proposal. The PUC rejected the first contract reached between Deepwater and Grid; the Legislature modified the law, and a modified contract was submitted to the PUC, which it approved 2-1.
Cost questions and cable
Speaking to the contract itself, the briefs argue that it fulfills all the requirements set forth in the law — it is commercially reasonable, is likely to provide great economic benefit to the state as well as environmental benefits.
“The General Assembly tasked the [PUC] to consider the commercial reasonableness of a small pilot project, recognizing that it necessarily faces a formidable economic barriers to entry into the energy industry.” These barriers include a price disadvantage vis-à-vis fossil fuels and the “inability to take advantage of economies of scale.”
The proposed Block Island wind farm, now likely to be comprised of six 5-megawatt turbines located three miles southeast of the island, has been describe by the developer and the former governor as a “demonstration” project. It would not only alleviate Block Island’s historically high electricity rates, they say, but would also act as a stepping stone to a much larger scale wind farm far to the east of the island, spurring the industry. Deepwater recently applied with the federal government to install 200 wind turbines between Block Island and Martha’s Vineyard.
The demonstration wind farm is expected to cost $205 million. The agreement calls for National Grid to pay no more than 24.4 cents per kilowatt-hour in the first year of a 20-year contract, with 3.5 percent escalations thereafter. It also directs any construction savings to the ratepayers, potentially lowering the first year electricity price.
Toray and Polytop say this will drastically raise their electricity rates and does not constitute “commercially reasonable.”
The Deepwater briefs argue that the industrial concerns challenge the Block Island demonstration wind farm “as if it is a full-scale commercial project intended to compete head-on with current fossil fuel providers. Acceptance of [this] proposed standard would ensure that Rhode Island never enters the offshore wind power industry, so that [the industry] never pays a penny more for energy than it has to.”
It goes on to say in a footnote that Toray, et al, resort to “repetitive attacks on General Assembly and the [PUC], alleging without foundation that the project is a ‘sweetheart deal’ or a ‘boondoggle.’ Toray’s real gripe is with the policy decision … that the potentially enormous economic and environmental benefits associated with Rhode Island’s advancement in developing alternative energy… justify the impact on electricity rates.” Furthermore, according to the brief, Toray’s “dissatisfaction” with the policy decision and the increase in electricity rates “is not a legitimate ground for appeal.”
It also dismisses charges by Toray and Polytop that, by not including the transmission cable between Block Island and the mainland, the approved contract was fatally flawed.
The cable question was always going to be considered in a separate agreement, the brief explains.
Governor, attorney general
Though the governor’s office is included as a respondent in these latest filings, new Gov. Lincoln Chafee has yet to announce his position on the issue. The involvement of the governor’s office was “a product of the Carcieri Administration,” said Chafee spokesman Mike Trainor, and does not necessarily indicate the current governor’s stance. He said the governor’s policy team has the matter “under intense evaluation,” and he expected a position to be announced in the near future.
New Attorney General Peter Kilmartin has also indicated his intention to end the Supreme Court appeal initiated by his predecessor. Calls to his office about when he will formally do so were not returned.
Objectors have until February 4 to file a response. Oral arguments are expected to take place in the spring.