Report may doom offshore wind farm; Senate panel's unreleased draft says Bluewater plan is too costly

Delaware should kill a 25-year purchase proposal for offshore wind energy, according to a draft report prepared for a legislative committee reviewing the state's energy supply.

Democrats pulled back from releasing the report Wednesday to wait for a final review by the full Senate Energy and Transit Committee, but four lawmakers agreed to discuss various details with The News Journal.

The draft -- written by committee Chairman Harris B. McDowell III, D-Wilmington North -- says that Bluewater Wind's offshore energy venture in Delaware could be jump-started with public aid. However, if approved as is, the report could be the death knell for a state-mandated offshore wind contract between Bluewater Wind and Delmarva Power.

"Probably the report will determine what will be done" on the wind vote in the Senate, said Senate President Pro Tem Thurman Adams Jr., D-Bridgeville.

"I knew that this report would not be favorable to Bluewater," said William Zak, a member of Citizens for Clean Power and a supporter of the wind project. "I don't have any doubt this will wind up in court. Delmarva has fought this so tooth-and-nail that I'm sure they won't stop until they exhaust their last chance."

The draft was written after a series of public hearings before the Senate Energy and Transit Committee. McDowell said the hearings had been fairly conducted to provide lawmakers with more information about the complex wind deal, but some critics of the process said the hearings were a sham.

"What I think we have now is a question of how broadly supported Harris McDowell is in the General Assembly," Zak said.

Delmarva Power recently released details on a competing plan to buy land-based, wind-generated electricity that would cost roughly one-third to one-half less than the 300 megawatts that Bluewater wants Delmarva to buy under the 25-year contract.

Three state agencies and the controller general voted to table that proposal in December, to avoid a split vote that would have killed the plan outright.

Billions in corporate revenues hang in the balance. The debate over the Bluewater project has spread to other energy issues, jeopardizing a pollution-control plan that could generate tens of millions of dollars in aid for low-income electricity users.

The political struggle also has clouded the future of the newly formed Sustainable Energy Utility, a conservation and renewable energy program backed by McDowell. The report by McDowell's committee is expected to shape the General Assembly's position.

Sen. Karen Peterson, D-Elsmere, said the report was critical of the Bluewater plan.

"If they adopt this report, it's shaping up exactly as I said it was going to," said Peterson, who described the Senate hearings as an attempt to make sure Bluewater's project was "dead."

Senate Minority Leader Charles L. Copeland, R-West Farms, said the draft version concluded the Bluewater plan is "not a cost-effective solution."

Copeland added that the draft report by McDowell's committee recommended Delmarva Power purchase onshore wind power and Delaware offer Bluewater a one-time incentive to build the project without other state-imposed guarantees.

The aid, Copeland said, would be similar to New Jersey's recent offer of up to $19 million to support private offshore wind ventures. New Jersey's approach obliges developers to find their own buyers for electricity generated by Garden State turbines.

Bluewater submitted a proposal to New Jersey, but has not released details. The company did say that it did not believe offshore ventures are feasible without a long-term power purchase contract.

McDowell said late Wednesday he might schedule a closed Senate Energy and Transit Committee meeting as early as this week for a final review of the report and a decision on its release.

A resolution in the House of Representatives, where there is greater support for the Bluewater proposal, would order the controller general to support Bluewater. Rep. John Kowalko, D-Newark South, said he was "cautiously optimistic" the House would take up a resolution today. Although the PSC and state agencies supported the project, rules adopted for the Bluewater review required a unanimous approval, and Controller General Russell T. Larson said there was no consensus among the Legislature's four party caucuses.

The resolution, however, would require approval in the Senate, where opinion is divided. No energy plan can be approved without approval of both houses.

"I don't think you're going to see the General Assembly go through the year without some sort of resolution," Copeland said.

Sen. Bruce Ennis, D-Clayton, said Bluewater's project offers clear economic benefits to Delaware.

Lawmakers ordered Delmarva in 2006 to review its energy needs and to seek new, in-state sources of electricity to stabilize rates and improve system reliability. That vote followed deregulation of the state's utility industry and a six-year freeze on rates, followed by a 59 percent hike.

Delmarva has said it supports renewable energy and wind power but considers Bluewater's contract too expensive. The company recently sought bids from land-based wind suppliers in other states.

A summary the utility distributed to lawmakers on Wednesday said it had received bids for up to 1,697 megawatts of wind power from Pennsylvania, Maryland, Illinois and Indiana -- "more than enough" to meet the company's needs. Prices ranged from $47 to $61 per megawatt less than Bluewater's, or 51 percent to 63 percent of the offshore rate, Delmarva said.

Jim Lanard, a Bluewater spokesman, on Wednesday described Delmarva's comparisons as stretched, noting Delmarva had failed to use a "hybrid" proposal for the offshore rate that benefited from lower-cost backup electricity from a conventional gas plant. He said Delmarva's prices for onshore wind also failed to account for all costs, and benefited from better terms than Bluewater was required to meet under state-supervised negotiations.

"We're concerned that the delaying tactics of Delmarva Power are designed to try to get past the end of the legislative session," Lanard said. "And we are concerned that at some point our bid may become stale." The session ends June 30.

Lanard said Delmarva had failed to take into account jobs, environmental benefits and other gains offered by Bluewater's proposal. Sen. George H. Bunting Jr., D-Bethany Beach, said that large numbers of residents in his district support Bluewater, but added that the project could have a downside.

"A lot of them who support it, push come to shove, can afford it, but I have got a lot of people who I represent who don't know anything about this," Bunting said. If Bluewater's project pushes local electricity rates higher "there are going to be a lot of people who live pretty close to the edge who are going to have to have some kind of assistance."

The wind dispute already has snarled efforts by Gov. Ruth Ann Minner's administration to win approval for a new surcharge on carbon dioxide emissions from large state power plants. Delaware committed to the surcharge under a regional agreement to reduce emissions of heat-trapping greenhouse gases blamed for climate change.

But talks on the timing of the new charges and state use of proceeds that could top $100 million by 2014 bogged down when environmental groups supporting the wind project attacked a plan to earmark much of the money for low-income energy assistance programs through the Sustainable Energy Utility.

"We're working very hard to stop that," said Chad Tolman, a Sierra Club Delaware member who has actively opposed McDowell's hearings that led to the report.

"These things do get linked," Tolman said.

Contact Jeff Montgomery at 678-4277 or jmontgomery@delawareonline.com.