Delmarva Power said a proposed 150-turbine wind farm poses extra costs and risks for its customers, setting the stage for a potentially contentious review by state officials who had hoped to move quickly toward a final contract.
Although its numbers were similar to those Bluewater Wind released on Thursday, Delmarva said there were many areas where the two companies had not reached agreement, including the start date, as well as the amount of energy provided in any given hour. The terms were included in a document Delmarva released Friday.
In a cover letter signed by Delmarva attorney Todd Goodman, Delmarva argued “the best offers proposed by the bidders pose unacceptable costs and risks on Delmarva’s electric customers.”
The “term sheets filed today represent the bidders’ best offers and do not represent final agreements between Delmarva Power and any of the bidders,” Delmarva wrote in a statement.
Bluewater and Delmarva are negotiating the terms of a long-term power supply contract in which Bluewater is proposing a 150-turbine wind farm for federal waters off the coast of Rehoboth Beach.
State agencies had demanded terms and conditions of the power-purchase agreement by Friday. Public Service Commission Executive Director Bruce Burcat said he would not comment on the term sheets until next month.
The PSC will review the terms and with three other state agencies decide whether to direct Delmarva to sign an agreement.
Delmarva’s position was a letdown for Bluewater.
“We’re disappointed that Delmarva has not agreed to more terms that we’ve negotiated for over three and a half months,” said Bluewater Wind spokesman Jim Lanard. Bluewater is committed to resolving the outstanding differences, and is willing to get back into the negotiating room next week, he said.
“Contrary to what Delmarva has said in its filing today, the Bluewater Wind prices in the term sheet will result in great benefits to Delmarva’s ratepayers,” Lanard said.
Meanwhile, there appeared to be fewer areas of contention for the natural gas plant proposals by NRG Energy and Conectiv Energy to back up the wind farm on days the wind doesn’t blow as hard.
After months of insisting it wanted to build its natural gas plant in New Castle County, Conectiv provided a plan more in line with what state officials were suggesting: a plant in western Sussex County.
Conectiv’s plan would be for a 195-megawatt facility near Bridgeville.
The Conectiv facility would back up the wind farm, but Conectiv would reserve the right to sell additional power to other clients and the open market. The plant would also have the ability to burn low-sulfur diesel fuel in the event natural gas is unavailable.
“We just wanted to add a little more reliability to our offer,” said Conectiv spokeswoman M.Q. Riding.
Conectiv has proposed that it sell backup electricity to Delmarva from the plant only if the cost is less than the open market price. The cost of natural gas would be determined by the price of raw materials at that time, Riding said.
Riding said Conectiv could have the natural gas plant up and running 24 to 36 months after the state gives it the go-ahead to proceed.
NRG’s plan calls for a 300-megawatt facility at its Indian River plant. NRG officials could not be reached for comment on their proposal.
Only one of the competing deals for the backup plant will win the contract.
On Thursday, Bluewater Wind outlined its proposal to build a $1.6 billion, 150-turbine wind farm off Rehoboth Beach. The wind farm, which would sit about 11.5 miles offshore, could provide 30 percent of the power to about 300,000 homes.
In negotiations, Bluewater cut the size of the wind farm by 50 turbines from its original proposal last year. Bluewater officials said that forced them to raise the price of electricity by 1.05 cents to 10.59 cents per kilowatt hour.
But in the written statement on Friday, Delmarva wrote: “It is noteworthy that the cost for the Bluewater Wind bid to Delmarva’s standard-offer service customers has increased from what was offered in the bids originally submitted to Delmarva, the commission and the state agencies. This fact, in particular, requires close scrutiny from all those who will be evaluating the proposed term sheets.”
Late last year, the state solicited bids for home-grown sources of electricity. That’s after Delmarva raised residential electricity rates by 59 percent when rate caps expired.
In May, the Public Service Commission and three other state agencies ordered Delmarva to negotiate with Bluewater for a 25-year power purchase agreement from an offshore wind farm. The agencies also ordered Delmarva to negotiate with NRG and Conectiv to bid for energy from a proposed backup natural gas plant.
Delmarva has filed suit to stop the process, saying it could lead its customers to buy too much electricity or pay too much for it. But Delmarva has stayed its suit pending the results of negotiations.
The Public Service Commission staff will issue its recommendation in October. The public will have a chance to comment later that month.
If the state agencies direct Delmarva to sign a Bluewater contract, the utility could continue its lawsuit in Superior Court. Or it could go back to the General Assembly and try to get the original legislation overturned.
The Public Service Commission staff will review all three proposed deals, and issue its recommendation in October. The public will have a chance to comment on the deals later that month. Four state agencies will decide whether to approve moving toward a formal contract and could direct Delmarva to sign it. Delmarva could take its fight to court.
By Aaron Nathans
The News Journal
15 September 2007
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