PUC questions farm price; PUC testimony focuses on higher electricity costs for R.I. industry

State Attorney General Patrick Lynch attended the state Public Utilities Commission's hearings on the Block Island wind farm contract Tuesday to hear testimony by Dr. Edward M. Mazze, who made a case for the negative economic impact the wind farm could have on Rhode Island businesses.

Mazze, professor of business administration at the University of Rhode Island, testified on behalf of two large industrial concerns in the state, Toray Plastics and Polytop, which are concerned the higher electricity rates coming from the Block Island wind farm contract would have adverse effects on their businesses and the state.

"The Block Island project may create a few jobs, but it's not going to have any significant [positive] impact on the Rhode Island economy," Mazze testified. He characterized statistics that claim the wind farm would have positive economic benefits for the state as "absolutely ridiculous" and "extremely speculative."

Outside the hearing room, Lynch said that for someone of Mazze's stature to testify "so eloquently how bad this project is for Rhode Island confirms that my position [opposing the wind farm contract] is the appropriate one for Rhode Island citizens."

Lynch also referred to a cable to deliver electricity to Block Island, which is part of the proposed eight-turbine project.

"There are other ways to establish a transmission line to Block Island," Lynch said, adding that the cable to the island is being used as a ribbon tied in a bow around a "devastating package, which would cost the ratepayers of Rhode Island a tremendous amount of money."

Shigeru Osada of Toray also testified in the afternoon session.

In a separate legal proceeding earlier in the day, the PUC heard arguments for and against Canadian power company TransCanada's motion to dismiss the amended Power Purchase Agreement between Deepwater Wind and National Grid for electricity generated by the proposed Block Island wind farm on constitutional grounds.

The hearings were concluded for the week, but will resume next Monday at the PUC offices in Warwick.

During the first day of the new hearings held Monday, PUC Chairman Elia Germani asked, "What am I missing here?"

His question was directed to William M. Moore, chief executive officer of Deepwater Wind. Germani pointed out that the price for electricity ratepayers would be the same under the current proposed contract to build the wind farm for $205 million as it was going to be under the previous proposed contract to build it for $219 million.

Germani wanted to know why $205 million was not mentioned during hearings held on the earlier contract, which the PUC unanimously rejected as being commercially unreasonable.

"If $205 million was the real number, why did you put $220 million?" Germani asked.

Moore explained that $205 million was always the cost Deepwater projected for building the wind farm and that the $219 million included substantial contingency funds. He described it as "a snapshot of our cost estimate at the time." With $205 million as the target cost for the farm proposed for within three miles of Block Island, Moore said that Deepwater's rate of return would be 10.5 percent, which would be "at the low end of what lenders and investors expect."

"This project has so much risk," Moore said, adding that Deepwater has every incentive to do it right to support the creation of a new industry in the area.

The current contract reached between Deepwater and National Grid calls for an opening price of 24.4 cents per kilowatt-hour in the first year of the farm's operation in 2013, with annual 3.5 percent hikes during the course of the 20-year contract.

The terms are essentially the same as the contract the PUC rejected in March; however in this iteration, Deepwater has agreed to "open book" accounting, with any savings in the wind farm's construction going toward lowering the opening price for ratepayers.

Germani was joined by commissioners Mary E. Bray and Paul Roberti as well as six PUC staff members. Also in attendance were 10 attorneys representing various parties interested in the case and a dozen witnesses and observers.