PUC turns down wind farm contract

Mon, 04/05/2010 - 6:30pm

4/3/10 — The three-member Public Utilities Commission Tuesday turned down the Power Purchase Agreement reached between Deepwater Wind and National Grid, apparently sinking chances that a small wind farm will be built within three miles of Block Island.

At the same time, the commission called for National Grid to explore providing a transmission cable to connect Block Island to the mainland.

“Block Island has a problem and Block Island’s problems need to be solved,” said commissioner Paul Roberti.

On Thursday, a spokesman for the state Division of Public Utilities and Carriers confirmed that the PUC would open a docket to explore a cable to the island. (See related story on page 15.)

The commissioners agreed that with above-market costs to ratepayers expected to reach $500 million, the proposed demonstration farm’s electricity was not “commercially reasonable,” as called for in enabling legislation.

“I wanted so badly to help the state get this initiative off the ground,” said Roberti. Still, he and fellow commissioner Mary Bray offered support for the larger utility-scale Deepwater project proposed for 17 miles off the coast of Rhode Island.

Under the proposed contract, National Grid would have paid Deepwater 24.4 cents per kilowatt-hour, with a 3.5-percent hike each year of the 20-year contract; the current wholesale price for electricity is 7.8 cents per kWh, said PUC Chair Elia Germani.

According to Germani, the contract would have resulted in Narragansett Electric ratepayers paying approximately $817 million for electricity they would otherwise have paid only $296 million for — an above-market cost of about half a billion dollars.

And, per the commissioners, the eight-turbine farm project would have provided a mere one-tenth of one percent of the state’s demand and only six permanent jobs.

Roberti also pointed out that National Grid’s $25 million “signing bonus” — in the form of 2.75-percent annual incentive allotments — would have been payable regardless of whether the farm came to fruition or not.

The commission agreed that the utility scale farm had the capacity to be far more advantageous to the state economically; but that large farm was not before the commission.

Deepwater Wind had argued the small Block Island farm was needed as a demonstration project to gain financing for the larger farm, expected to cost $1.2 billion.

“What are we demonstrating?” asked Roberti. He argued that wind energy was already an established technology. How, he asked, would a demonstration of Rhode Island’s ability to fast track permitting help with the larger project set for federal waters? He was also skeptical that federal permitting would not have slowed down the smaller project as well.

Roberti said the enabling legislation, which called for a 10-megawatt renewable energy project that tied into Block Island, provided difficulties for the commission. While he understood the state’s desire to include Block Island, the economies of scale made the eight-turbine project far too costly. Block Island’s problems needed to be discussed separately, he said.

Also, Roberti said the solicitation process — which resulted in only one bidder — made it difficult for the commission to gauge the fairness of the price.

Finally, Roberti allowed that the public hearing held on Block Island on March 26 had an effect on his thinking. He mentioned testimony of many island homeowners who decried the prospect of wind turbines in their view sheds (see related story, page 9).

Nevertheless, he said the commission remained bullish on wind energy and the larger utility-scale project.

“We’re not going off the road into a ditch on this,” he said.

Roberti said he was impressed by Deepwater, and understood why the governor wanted to work with the company. He said he looked forward to working with the company as it pursued the larger project.

Immediate responses

“Back to the drawing board,” said Deepwater CEO Bill Moore. He said the company’s “core business plan is to build offshore — with good reason.”

In an official statement released later, Moore said, “We are extremely disappointed in today’s decision. This vote is a serious setback to Rhode Island’s plans to become the leader in the nation’s offshore wind industry. With this vote, the plans to provide Rhode Island with clean, renewable wind power and to establish a green jobs hub at Quonset Point are in jeopardy. Deepwater Wind is now forced to reevaluate our plans for Rhode Island.”

Mohegan Trail and Redmond, Wash., resident Jonathan Ives, an opponent of the small wind farm, said the PUC made “a fitting decision.”

“Really a courageous decision,” agreed Rosemarie Ives. “They should be lauded.”

Michael and Maggie Delia, New Jersey residents who have a home near the Southeast Lighthouse, called the decision a win for democracy. “I feel this is a win for America,” said Maggie Delia. “These people [the PUC] really are listening. So many times it doesn’t go the way it should.”

“Due process was honored,” said Michael Delia. He added that the $25-million National Grid incentives alone would go a long way toward paying for a cable to Block Island.

Moore met briefly with the Ives and Delias in the aftermath of the decision. “You guys prevailed,” said Moore without acrimony. The island residents pledged to help Deepwater get the larger utility-scale farm built, as well as the cable.

National Grid

National Grid spokesman David Graves said the company was “disappointed” with the decision. Grid had negotiated in good faith and fulfilled the mandate of the legislation, said Graves.

He said it was not clear how discussion would begin regarding a cable to Block Island.

Grid has experience installing two electricity cables to Nantucket, Graves said, and residents pay a seasonal premium to cover the costs.

Block Island has pursued a cable in the past, but found it too expensive. However, in those previous attempts, the cost would have been shouldered entirely by Block Island ratepayers; in this case, it appears the cable cost would likely be spread among all National Grid ratepayers in Rhode Island.

Graves said that as part of the cable connection to Nantucket, National Grid purchased the local power company, Nantucket Electric.