Business group balks at cost of wind power

WARWICK - Some of Rhode Island's largest users of electricity have come out for the first time in opposition to a proposed power-purchase agreement between National Grid and the developer of an eight-turbine wind farm in waters off Block Island.

The executive director of the Energy Council of Rhode Island, a nonprofit organization known as TEC-RI that represents 35 of the state's biggest manufacturers, universities and hospitals, testified on Tuesday against an agreement under which Deepwater Wind would sell power generated by the offshore wind farm at more than twice the price National Grid pays for electricity from conventional sources.

John Farley told the state Public Utilities Commission that the higher price of power from the wind farm would be a burden on the members of TEC-RI that collectively employ 50,000 people in the state, including Hasbro and Rhode Island Hospital.

For example, Toray Plastics America, which operates a factory in North Kingstown that is the largest consumer of electricity in the state, would have to pay an additional $260,000 annually if the proposed contract were to go into effect. Brown University would face an increase of $200,000 a year.

"We have concluded that this contract includes a price that is so high that it more than negates any other potential attractive features, such as job creation, added local supply and environmental protection," Farley said.

Farley spoke during a public comment period on the first day of evidentiary hearings before the PUC, which is considering whether to approve a 20-year contract between Deepwater, a New Jersey startup that wants to build the wind farm within three miles of Block Island by 2012, and National Grid, Rhode Island's dominant electric utility.

Under the deal being reviewed, National Grid would pay 24.4 cents per kilowatt hour for power from the project starting in 2013. The price would increase by 3.5 percent a year. The utility currently pays 9.2 cents per kilowatt hour for power from natural gas-fired plants and the like.

National Grid agreed to Deepwater's price after taking into consideration that the Block Island wind farm is being developed as a demonstration project and would be the first of its kind in the United States.

"We believe that we have the best price we could get given the limitations of this project," National Grid lawyer Ronald Gerwatowski told the commission.

For a typical household that uses 500 kilowatt hours a month, the additional cost of the proposed agreement would amount to $1.35 a month, or $16.20 a year. The impact on large businesses such as Toray - which buys about 8.3 million kilowatt hours per month from National Grid - would be deeper, and could force them to rethink their operations in Rhode Island, said Farley. The proposal comes after the utility raised distribution rates on March 1.

"That's what we're really concerned about - the overall competitiveness of Rhode Island," Farley said.

The PUC must decide whether the contract is "commercially reasonable," and is considering testimony from energy-market analysts and comments from the public. The hearings will continue through the end of this week, and a vote is scheduled for March 30.

The proceedings opened with testimony from Governor Carcieri, a vocal supporter of Deepwater's project. The Carcieri administration selected Deepwater as the state's preferred developer of offshore wind in 2008.

The governor acknowledged the high price of power from the wind farm, but said the rate is reasonable considering that it is predictable compared to the volatility of fossil fuel prices. He also said the clean energy project would generate much-needed jobs in the state. Deepwater is also planning a 100-turbine development in waters off Rhode Island, and estimates that together that project and the smaller wind farm would create 800 local jobs.

An executive with Energy Management Inc., the company behind Cape Wind, an offshore wind farm proposed in Massachusetts, also testified in favor of the power-purchase agreement. His company is currently negotiating with National Grid for the sale of power from its project.

"A lot of industries are looking to pull out of this region," Energy Management vice president Dennis Duffy said. "This is one new industry that is trying to get in."

After the public comment period, the commission questioned Cliff Hamal, an energy expert hired by National Grid who analyzed prices for power from offshore wind farms installed in Europe and proposals in Canada and the U.S.

Commission Chairman Elia Germani asked Hamal if he knew of any offshore wind contracts with prices higher than 24.4 cents per kilowatt hour.

"No, I don't," said Hamal.