The Town Council has approved a contract with a private company to replace the broken wind turbine near Portsmouth High School.
PORTSMOUTH — The town’s long journey to find a solution to its wind energy problem finally came to an end Thursday night when the Town Council signed a contract with a private company to replace the broken turbine at the high school.
In an unanimous vote, the town entered into a contract with Wind Energy Development (WED) of North Kingstown that will allow the town to pay off the remaining debt that’s left on the turbine, which voters approved with a $3 million bond issue in 2007. The turbine was built in 2009 but has been idle since 2012 due to a faulty gearbox that was supplied by a company that has since gone bankrupt.
According to Finance Director Jim Lathrop, the town still owes more than $1.6 million on the turbine and the annual debt service totals more than $220,000.
Under the agreement approved by the council, WED will pay a lump sum of $1.45 million to the town. In exchange, the town will buy energy generated from the new 1.5-megawatt turbine over a 25-year period at a rate of 15.5 cents per kilowatt hour.
WED was originally going to make seven annual payments to the town of $285,714, totaling $2 million. Then LED came back with an option to pay $900,000 up front plus $30,000 annually for the life of the lease, totaling $1.65 million.
On Thursday, the council decided to go with yet a third option: the lump sum payment of $1.45 million. At a meeting with WED on Oct. 27, council expressed concerns about the possibility of the company going out of business early on during the lease.
“That eliminates risk to our taxpayers and gets the main portion of the obligation off the books right away,” Council President James Seventy said of the lump sum payment.
Council member David Gleason agreed. “We just want to make sure we’re getting the best deal for all of our citizens,” he said.
WED’s payment to the town must take place within 180 days from the date of the town signing the contract, which was Thursday night. The 25-year energy lease with the town begins when the new turbine is operational.
Incentives for quick work
Although the contract calls for LED to remove the broken turbine within two years, both sides said they hope to get the job done much sooner.
Mr. Lathrop said the town is eager to get the turbine down because of liability issues and the fact that its scrap value decreases over time. Also, the town’s energy contract expires Dec. 1 and it will be more expensive to purchase electricity on an interim basis before the new turbine is online, he said.
“If I buy energy on a month-to-month basis, it’s almost double,” said Mr. Lathrop.
Under the agreement, WED will remove the existing turbine and find the best offer to sell, salvage or scrap it. All proceeds will go to the town and applied against WED’s payment. So, if proceeds from the sale, salvage or scrapping of the turbine equals $50,000, that amount will be subtracted from the company’s payment to the town.
In addition, WED will receive an “early removal credit” of $7,500 per month up to $75,000. For example, if WED removes the existing turbine 18 months after the start of the contract, the company will be awarded $45,000 against its payment obligation to the town.
The agreement with WED calls for the town to purchase from the turbine up to 3.6 million kW/hr of energy per year, the approximate amount of electric energy currently purchased by the town, including the School Department.
Upon a request from the School Committee, the town has agreed to pay the difference to the school district if electric rates fall below the minimum of 15.5 cents per kilowatt hour as WED requires. (The School Committee unanimously endorsed the turbine plan Wednesday night.)
“Based on our information, when the wind turbine is up we will not be buying electricity above market rates,” said Mr. Lathrop.
The complete letter of intent between the town and WED can be read here.