Deepwater unfazed by impasse with Grid

PROVIDENCE - After two months of talks, National Grid Plc said Wednesday it still has not agreed on a contract to purchase electricity from the first of Deepwater Wind LLC's two proposed offshore wind farms.

Although it was the second time in recent weeks the state's dominant utility rejected an offer from Hoboken, N.J.-based Deepwater, an executive with the company said the filing with the R.I. Public Utilities Commission (PUC) may not stop the project from moving forward.

In the filing, National Grid submitted an unsigned power-purchase agreement, saying the two sides continued to disagree on the issue of price.

National Grid said Deepwater wants to charge 25.3 cents per kilowatt-hour in 2013, the wind farm's first full year of operation. The utility estimates the price would increase 3.5 percent each year after that.

"National Grid had hoped that Deepwater would be able to offer a firm, unconditional price between 20 to 25 cents per kilowatt-hour in 2013, but to this point, they have not done so," the utility wrote in a letter to the PUC, which can approve or reject the contract.

Deepwater Chief Development Officer Paul Rich said Thursday his company never promised that its electricity rates would fall within that range in 2013. A number floated of 22 cents per kilowatt-hour represented the sales price in today's dollars, not adjusted for inflation, Rich said.

Rich also said he thought the letter to the PUC signed by National Grid lawyer Ronald T. Gerwatowski offered hope that the utility would not oppose a commission decision to approve the contract.

In the letter, Gerwatowski said there may be a "rational basis" for the PUC to approve the contract if the wind farm was a demonstration project and if one of the commission's goals was to generate electricity for Block Island, which pays some of the highest electric rates in the nation.

"The way I'm interpreting this filing is if the commission finds a rational basis for approving this filing, it doesn't seem Grid would have a problem with that," Rich said.

In its letter, National Grid emphasized that it would not endorse a price of 25.3 cents per kilowatt hour even if the PUC found other reasons for approving the contract.

"National Grid believes that there are likely to be other renewable generation projects that will present less expensive renewable generation options for customers that will achieve the same or greater environmental benefits," the company wrote.

But the utility added that it was possible a loan guarantee for Deepwater from the U.S. Department of Energy under the economic stimulus package could lower borrowing costs and reduce the price.

Grid also said it did not have enough time to evaluate what the price would be if the wind farm produces more electricity than forecast.

Rich said the smaller project remains on track for completion in 2012, assuming National Grid and Deepwater can reach an accord. But he added that the company wants to start construction soon to take advantage of federal tax breaks and other incentives that could expire.

"We really can't endure too much more delay before it starts to really challenge us on the schedule," Rich said.

Under a state law which mandates that National Grid purchase renewable energy - and which includes criteria that favors Deepwater's proposal - the PUC could order arbitration if the two sides cannot find common ground.

National Grid rejected Deepwater's first proposed contract in October, saying the electricity would cost around 30.7 cents per kilowatt-hour, an estimate that Deepwater Wind sharply disputed.

At the time, the PUC faced a Dec. 31 deadline to approve a contract between the two sides. But during the General Assembly's special session late last month, lawmakers extended the deadline until the end of January.

Since the law's passage, Deepwater has ramped up operations in Rhode Island.

The company announced last week that it has hired Sandra T. Whitehouse, the wife of U.S. Sen. Sheldon Whitehouse, D-R.I., as an independent permitting consultant. She is a former chairwoman of the R.I. Coastal Resources Management Council, a senior policy adviser to the Ocean Conservancy and an independent environmental policy adviser to the R.I. House of Representatives.

Deepwater also hired Bryan Wilson, a former town councilor in New Shoreham, to serve as its liaison to the island's population. In Providence, the company said Susan M. DeMacedo has joined the company as a full-time office manager.

Separately, National Grid on Thursday announced its pretax profit rose 16.3 percent in the first half of this fiscal year thanks to lower interest rates and an increasing in cash flow from operations.

Excluding one-time charges, the London-based utility, which sells gas and electricity in the U.S. and the U.K., posted a profit of 649 million pounds ($1.08 billion) in the six months ended Sept. 30, up from 558 million pounds in the first half of last year. Revenue slipped 0.5 percent to 6.04 billion pounds ($10.04 billion).

"We have made good operational and financial progress against our priorities for this year and have delivered a very strong financial performance in the first half," National Grid CEO Steve Holliday said in a statement. The utility's borrowing costs have fallen in recent months as the strain on global credit markets has eased.

Additional information is available at dwwind.com and ripuc.org.