Hearings Begin On Cape Wind/National Grid Deal

By: Michael C. Bailey
Published: 06/18/10

The Alliance to Protect Nantucket Sound has filed a motion to intervene in a series of public hearings on a proposed power purchase agreement between Cape Wind and National Grid.

The hearings, which began Wednesday in Bridgewater, are to receive public testimony on the long-term power purchase agreement. Audra Parker, president and CEO of the Alliance, said the motion to intervene simply means that the Alliance would become a formal participant in the hearing process and may submit formal testimony.

The power purchase agreement, hammered out earlier this year, would have Cape Wind sell half of the power generated by the facility to National Grid for a starting rate of 20.7 cents per kilowatt hour (kWh).

This rate includes the cost of the power itself; Renewable Energy Certificates (RECs), which energy providers may purchase from producers to help meet renewable energy mandates; and “Hedge Value,” which refers to the value of a price volatility protection provision in the contract. The individual costs of those three attributes are 12.5 cents per kilowatt hour (kWh), 6.7 cents/kWh, and 1.5 cents kWh, respectively.

The Massachusetts Attorney General’s Office is reviewing the agreement, a power granted to the office under the Green Communities Act.

“Massachusetts has some of the highest electric rates in the country and our taxpayers and electric ratepayers have had enough,” Ms. Parker said in a press release. “This administration has completely abdicated its responsibility to ratepayers in favor of corporate special interests…we are well on our way to the next Big Dig.”

Each of the approximately 1.2 million National Grid customers would see an estimated $1.59 monthly increase in their typical electric bill, according to Cape Wind and National Grid. The Alliance claims the actual monthly increase would be $3.33, and National Grid customers would pay a total of $100 million in inflated energy costs in the first year of the contract alone.

By the end of the 15-year contract, which includes a 3.5 percent annual rate increase, the Alliance claims the increase will in the final year have doubled to $200 million. The total projected cost of the contract comes in at $1 billion, the Alliance stated.

The Alliance also claimed in the press release that the 20.7 cents/kWh is “a 256 percent increase compared to the current rate of electricity.” According to the Massachusetts Department of Public Utilities (DPU), which is holding the hearings and must sign off on the agreement, National Grid’s default service rate for residential customers is 8.11 cents/kWh, the lowest in the state.

Ms. Parker said that this is “directly an apples-to-apples comparison” of the two rates, since both include all costs and charges except the distribution charge, which would inflate the rates slightly. “You can slice it any way you want,” she said, “but the ratepayer is still paying that full cost for Cape Wind’s power.”

Mark Rodgers, communications director for Cape Wind, disagreed. “They are comparing the energy price today for brown power to at 2013 price for Cape Wind,” he said, “brown power” referring to fossil fuel-produced electricity.

“For one thing, the economy is expected to improve over that time period and fossil fuel demand and fossil fuel prices will be higher than they are now,” Mr. Rodgers explained. “Second, we are providing National Grid with all of the environmental attributes that go with that power, including Renewable Energy
Credits…if [National Grid] doesn’t get them from us they need to buy them from someone else.”

At its stated 20.7 cents/kWh rate, Ms. Parker said the cost of Cape Wind energy flies in the face of the Green Communities Act’s cost-effectiveness standards.

The 20.7 cents/kWh rate cited by Cape Wind assumes that the developers receive federal incentives to assist in the facility’s construction. Failure to obtain that funding would slightly increase the rate, as could a four percent increase that Ms. Parker said would go into effect if National Grid accepts the contract.

That increase is listed as a “power cost reconciliation tariff,” which Ms. Parker said would be tacked on to customer rates.

The first DPU hearing was held Wednesday at Bridgewater State College. The second is scheduled for Monday on Nantucket, the third for Tuesday in Worcester. No hearings are to be held on Cape Cod as National Grid does not serve the region.