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Bluewater offers serious concessions; wants more state involvement  

Bluewater Wind has made serious concessions in its bid to sign a power purchase agreement with Delmarva Power. In a document filed Tuesday, Nov. 6, Bluewater revised its bid to supply wind power in Delaware, eliminating price escalators that had drawn fire in a report to staff agencies.

As the state continues its effort to secure dependable, reliably priced electricity for Delaware consumers, a Public Service Commission staff report released Oct. 29 declined to endorse Bluewater’s bid because of the escalators on commodities and exchange rates.

Based on the calculations of an independent consultant, the staff said that the worst case scenario price hikes would put too much risk on ratepayers. Removal of the escalators addresses the staff’s primary concern, said Bluewater in its newest filing.

At the same time, Bluewater also says that it had previously concluded the possibility of commodity price increases making construction costs unmanageable was unlikely. But, Delmarva Power, directed by state agencies to negotiate with Bluewater, still opposes the deal.

The power supplier said, “We maintain that this is a bad deal for our customers, even without the escalators.” Delmarva Power says there are other sources of renewable energy available at lower prices which have not been considered by the state agencies because they are not produced in Delaware.

University of Delaware researchers Willett Kempton and Jeremy Firestone have continuously called for caps on the escalators. Kempton said he was surprised by the announcement, but both are pleased with the latest turn of events. Firestone said, “It is even better than a cap for the ratepayers.” Elimination of the escalators should simplify the debate over the wind farm since the price will no longer be subject to fluctuation, he said.

Bluewater has also requested state agencies take a more active role in the next phase of negotiations as it issues complaints about Delmarva Power and blames that company for difficulties in negotiations.

Delmarva Power says despite Bluewater’s allegations, it negotiated in good faith. In the new documents, Bluewater writes, “From the early stages of the negotiations, it was clear Delmarva’s strategy was designed to force Bluewater into a contract structure where the price would rise dramatically – only to be faced with a subsequent argument by Delmarva that the price was too high.” This was done by seeking a reduction in the size of the project, the new proposal says.

Bluewater also alleges Delmarva Power tried to undermine the negotiation process by, on the final day, marking a majority of terms previous agreed upon as being in dispute. “Through this last-minute maneuver, Delmarva has made clear they oppose the adoption of most, if not all, of the term sheet provisions they negotiatied,” meaning the state agencies will need to approve the term sheets over Delmarva Power’s objections, said Bluewater.

Bluewater complained further about fees it might have to pay to Delmarva for late completion or for failure to deliver power.

Negotiations proved difficult because Delmarva Power had the intention of terminating the process, said Bluewater. The wind company said it was “faced with the requirement of negotiating a term sheet that could withstand the close scrutiny of its investors, while simultaneously guarding against Delmarva Power’s efforts to drive up the costs to its ratepayers.” Bluewater said this would allow Delmarva to return later with charges that the proposed deal would be too expensive.

Delmarva Power disagreed with the accusations of poor negotiating practices, saying, “We vehemently disagree with Bluewater Wind’s representations around negotiations…” Delmarva Power was confident that Professor Larry Hammermesh, an independent observer charged by the PSC with overseeing negotiations, would confirm that it had negotiated with Bluewater in good faith.

The wind company now wants the PSC staff and its independent consultant to take active involvement in the negotiation process. Bluewater applauded Delaware’s Legislature for directing Delmarva Power to seek proposals on new sources of electricity generation, saying that the state had a chance to take control of its energy future and make progress toward reliance on “clean, renewable, stable-priced energy.”

The document says Bluewater feels the staff concerns are important for Delmarva customers. “It is necessary that the State Agencies step in to protect the ratepayers because Delmarva struggles to strike a balance between securing profits for its shareholders serving its ratepayers. As an essentially unregulated for-profit monopoly in the SOS market, Delmarva has ample incentive to favor its shareholders at the expense of ratepayers.”

Delmarva Power continues to support a competitive bidding process among green power providers. It says there are other, less costly sources of green-power available that have not been considered by the state agencies because they are produced outside of Delaware, although they are part of the power grid which services this area.

By Leah Hoenen

Cape Gazette

9 November 2007

This article is the work of the source indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

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