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Wind farm, utility agree

National Grid has agreed to pay Deepwater Wind the same price previously negotiated for electricity from a wind farm planned in waters off Block Island but, in a new contract proposal filed with state regulators on Wednesday, the two sides left open the possibility of a lower price.

PROVIDENCE - National Grid has agreed to pay Deepwater Wind the same price previously negotiated for electricity from a wind farm planned in waters off Block Island but, in a new contract proposal filed with state regulators on Wednesday, the two sides left open the possibility of a lower price.

It is the second agreement Rhode Island's dominant electric utility and the state's preferred developer of offshore wind energy have submitted to the state Public Utilities Commission. The first was rejected in March, because the starting price - also 24.4 cents per kilowatt-hour, but without the possibility of a decrease - was deemed not "commercially reasonable" by the three-member commission.

The new contract uses that price in the first year, but as an upper limit. Under what's known as an "open-book" proposal, Deepwater's accounts would be audited by a third party selected by the state and the price would be set according to the actual construction costs of the eight-turbine project, estimated at $205 million, and a predetermined return on investment for the company of between 10.5 and 12 percent. The amended price would then increase 3.5 percent annually over the 20-year... more [truncated due to possible copyright]  

PROVIDENCE - National Grid has agreed to pay Deepwater Wind the same price previously negotiated for electricity from a wind farm planned in waters off Block Island but, in a new contract proposal filed with state regulators on Wednesday, the two sides left open the possibility of a lower price.

It is the second agreement Rhode Island's dominant electric utility and the state's preferred developer of offshore wind energy have submitted to the state Public Utilities Commission. The first was rejected in March, because the starting price - also 24.4 cents per kilowatt-hour, but without the possibility of a decrease - was deemed not "commercially reasonable" by the three-member commission.

The new contract uses that price in the first year, but as an upper limit. Under what's known as an "open-book" proposal, Deepwater's accounts would be audited by a third party selected by the state and the price would be set according to the actual construction costs of the eight-turbine project, estimated at $205 million, and a predetermined return on investment for the company of between 10.5 and 12 percent. The amended price would then increase 3.5 percent annually over the 20-year contract.

"While the starting price remains at 24.4 cents per kilowatt-hour in 2013, the new pricing provisions contemplate the potential for this price to be lowered," National Grid lawyer Ronald T. Gerwatowski said in a letter that accompanied the filing.

Potential savings on capital costs envisioned by Deepwater could bring the price down to 22 cents per kilowatthour or thereabouts, said Deepwater chief development officer Paul Rich.

"I think 10 percent is in the realm of possibility," he said.

The new agreement provides for an additional source of savings for Rhode Island ratepayers. If the wind farm performs better than the 40-percent capacity projected in the contract, then the price would also go down.

But even the lower price quoted by Rich is still more than twice what National Grid pays overall in Rhode Island for energy from natural gas-fired power plants or nuclear facilities. Nevertheless, there are reasons to believe the latest contract could get a different reception this time from the Public Utilities Commission.

First, a lower price would be closer to one key benchmark: the proposed 20.7-cent per kilowatt-hour starting price of power from Cape Wind, the 130-turbine offshore project in the works in Massachusetts.

And second, the parameters under which the Deepwater price will be reviewed have been changed in the developer's favor since the last time the project went before the PUC. Two weeks ago, Governor Carcieri signed a law that requires the PUC to consider other factors during its deliberations rather than focusing primarily on the price of power from the wind farm, which is envisioned as a precursor to a 100-turbine project also in waters off Rhode Island.

The law directs the PUC to consider positive effects of the project on economic development and potential environmental benefits. It also narrows the standard that will be used to assess the price.

The filing of the contract on Wednesday had been expected for weeks. Deepwater is on a tight schedule to start work on the wind farm this calendar year to qualify for federal investment tax credits that are equal to 30 percent of the project cost.

Carcieri welcomed the new agreement.

"I commend Deepwater Wind and National Grid for acting quickly to move this project forward, ensuring Rhode Island remains the leader in developing the nation's first offshore wind project," he said in a statement.

When Rich was asked if he expected the new contract to fare better before the PUC than the last one, he was circumspect.

"I think that within the context of the statute they were given last time, they had the latitude to reach the decision they did," he said. "In this new statute, they are given the right context to make another decision."


Source: http://www.projo.com/news/c...

JUL 1 2010
http://www.windaction.org/posts/26992-wind-farm-utility-agree
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