Bluewater Wind and Delmarva Power are headed back to the negotiating table after four state agencies made an aggressive push Tuesday to seal a deal for offshore wind power.
The agencies unanimously agreed at a public meeting in Legislative Hall to set a Dec. 10 deadline for the utility to complete a contract with Bluewater to buy wind power for 25 years.
The product of the negotiations will be sent to the four agencies, who are expected to cast a yes-or-no vote Dec. 18. The agencies are the Public Service Commission, the Office of Management and Budget, the Department of Natural Resources and Environmental Control, and the controller general.
“This is a full-court press to try to get this finished by the end of the year,” said James Geddes, staff counsel to the Public Service Commission.
Lawrence A. Hamermesh, who has acted as a mediator, will take a more active role now, said Geddes. This time, Hamermesh will act more like an arbitrator.
The contract could include a surcharge on all Delmarva Power delivery customers, including large industrial companies, to spread out the cost of building the wind farm.
The decision amounted to a second chance for Bluewater, whose previous bid was rejected by the Public Service Commission staff as too risky and expensive.
Earlier this month, Bluewater removed mathematical formulas from its bid that would have increased the price of its wind power as commodities like steel increased in price.
Geddes said the staff’s recommendation might have been different had Bluewater submitted a contract in September without the commodity “escalators.” He said the further negotiations will help the agencies make an informed decision on whether the price for wind power is in the best interest of ratepayers.
“The real question is: Is that their best price?” Geddes said, referring to Bluewater.
Delmarva President Gary Stockbridge said he hopes further negotiations address the issue of fairness to customers.
Stockbridge said that under the current proposed contract, those who buy 28 percent of Delmarva’s electricity – the residents and small businesses – would pay for the wind farm, but everyone in Delaware, including large industries, would realize the environmental benefits.
Would reopen bidding
He also said he hopes more companies will get the chance to bid on the wind contract, which could drive down the cost of wind power.
Stockbridge said he was pleased the state agencies appear willing to spread out the costs.
But the agencies did not indicate a willingness to reopen the wind contract to other companies.
“We’re disappointed there seems to be a rush to a decision,” Stockbridge said.
When asked if Delmarva would ultimately sign a contract if the state doesn’t reopen the bidding, Stockbridge said, “We never say never. We’ll just see how this evolves.”
Bluewater President Peter Mandelstam said he was “very pleased with the outcome,” and answered Stockbridge’s criticism by saying his company’s bid was in fact competitive.
Bluewater was one of three companies last year to bid to build a new source of electricity in Delaware. The others were NRG Energy, which wanted to build a coal gasification plant, and Conectiv Energy, Delmarva’s sister company, which wanted to build a natural gas-fired plant.
NRG and Conectiv are now seeking to build a natural gas plant to back up the wind farm. The state agencies instructed those two companies to wait for Bluewater and Delmarva to finish their business before any negotiations for a backup generator could resume.
Willett Kempton, a University of Delaware associate professor of marine policy, cast Tuesday’s decision as historic, saying it was the first time a state had directed parties to complete a power purchase agreement for an offshore wind farm.
“They made a very clear decision to get closure,” Kempton said.
Still, there’s the possibility that the agencies will reject a contract.
Bert Scoglietti, director of policy and external affairs for the Office of Management and Budget, said he was heartened that Delmarva was looking out for the best interests of its customers.
He held out the possibility that the state might have a “viable alternative” in seeking renewable energy by using a long-term planning process instead.
PSC Commissioner Dallas Winslow said any issues left unresolved in negotiations will be settled by the state agencies, or by the governor and Legislature.
PSC Commissioner Jeffrey Clark brought up the suggestion that the parties discuss a surcharge for all Delmarva customers to help defray the costs. He called the surcharge “non-bypassable” because all Delmarva customers would be subject to the fee, including those who buy power from other companies but have it delivered by Delmarva.
“By spreading it across the entire Delmarva load, it might be a lot more palatable,” Clark said.
But the surcharge wouldn’t apply to those who have their power delivered by municipalities such as Dover or Newark, or to the customers of the Delaware Electric Cooperative.
It would take an act of the Legislature to spread the surcharge to non-Delmarva customers, said Bruce Burcat, the PSC’s executive director.
Tuesday’s decision came after 22 members of the public addressed the agencies. Of those, 21 were in favor of the wind farm.
One of the members of the public who spoke on Tuesday was former Gov. Russell W. Peterson, 91, who said that global warming was unfolding at a faster rate, and with more intensity, than scientists originally expected.
Delaware can’t count on out-of-state renewable power because those states will have first dibs on it, he said.
“The whole society is moving toward green energy,” Peterson said in an interview. “People standing in the way are going to get run over.”
By Aaron Nathans
21 November 2007
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