The Massachusetts Supreme Judicial Court (SJC) will hear arguments September 8 from Associated Industries of Massachusetts and three other groups seeking to overturn the state’s approval of a power-sales agreement between National Grid and Cape Wind. AIM believes the agreement would add $1 billion in unnecessary charges to the electric bills of businesses and consumers in National Grid’s service territory.
Robert Rio, Senior Vice President and Counsel at AIM, and Robert Ruddock, General Counsel, will argue the appeal before the seven-member SJC on behalf of the association. Other parties challenging the agreement include the Alliance to Protect Nantucket Sound, TransCanada Power Marketing Ltd. and New England Power Generators Association.
A decision is expected in late 2011 or early 2012.
The 15-year deal approved in November by the Massachusetts Department of Public Utilities (DPU) will saddle ratepayers with the highest power price ever negotiated in Massachusetts and tens of millions of dollars in commissions that National Grid will receive for signing the contract with the offshore wind project.
The agreement was the first to be approved under a provision of the Green Communities Act (GCA) that allows utilities to sign long-term contracts for renewable power directly with generators.
Other Massachusetts utilities such as NSTAR have since negotiated renewable power contracts at less than half the 25 cents per kWh average cost of the National Grid/Cape Wind agreement. The cost difference stems primarily from the fact that National Grid chose to negotiate with Cape Wind individually, outside a competitive bidding process, while NSTAR and the other utilities chose to bid their renewable power requirements competitively for generation anywhere in New England.
The legal challenges by AIM and others are based upon three broad arguments:
National Grid’s allocation of the above-market costs of Cape Wind to ratepayers is inconsistent with the law and harms ratepayers on competitive energy supply;
The amount of the Power-Purchase Agreement exceeds 3 percent of total electricity demand in the National Grid territory and therefore exceeds the legal cap on the amount of renewable power utilities must purchase through long-term contracts; and
The National Grid/Cape Wind contract was not competitively bid.
The first issue is the most important for AIM member employers.
National Grid has chosen to allocate the $1 billion in above-market costs of Cape Wind to all customers, even though the power will be funneled only to the customers who buy electricity from National Grid. That means businesses that buy power on the competitive market to help moderate their costs will be forced to pay extra money – tens of thousands of dollars in some cases – for power they do not use, essentially making them pay twice for electricity.
The allocation is not only unfair but a direct violation of the law.
“We are hopeful that the Supreme Judicial Court will review the plain language of the law and disallow this unfair rate treatment,” said Ruddock.
In addition, without a cap on utility purchases, costs could increase multiple times when further contracts are approved.
Employers who wish to watch the SJC hearing may do so here at 9 a.m. on September 8.
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