In one corner, we’ve got Gov. Deval Patrick’s administration and the would-be developer of the country’s first offshore wind farm.
In the other corner, there’s the wind farm developer’s archenemy, the state’s largest employer group, and a coalition of New England power plant owners.
The fight over Cape Wind could turn into one big smackdown at the Supreme Judicial Court on Thursday.
The oral arguments will focus on one specific question: Is Cape Wind’s contract to sell half its power to National Grid allowed under a state law that encourages the use of renewable energy?
The issue might seem narrow. But the SJC’s final decision could determine the fate of the 130-turbine wind farm proposed for Nantucket Sound. This $2 billion-plus project won’t get built without financing. And potential financiers won’t touch it with a 10-foot monopole if Cape Wind can’t line up long-term contracts to sell the bulk of its power.
Developer Cape Wind Associates went a long way toward providing that reassurance in November when the state Department of Public Utilities approved the contract to sell half of Cape Wind’s power to National Grid. The price would be nearly 19 cents per kilowatt hour in the first year, rising 3.5 percent annually over the life of the 15-year contract.
But it would be National Grid customers – not National Grid investors – who would pay the price. It’s a price that happens to be roughly twice the wholesale cost of electricity today.
This would be a small part of National Grid’s overall power purchases, so the final impact on customers’ monthly bills would be small. But Associated Industries of Massachusetts certainly noticed. It didn’t take long for AIM to sue the state agency over the contract.
Critics have warned about new navigation obstacles for boats, planes and fishermen. However, the main knock against Cape Wind involved aesthetics: Nantucket Sound is a treasured natural resource that shouldn’t be spoiled by a power plant, even one that relies on a never-ending fuel source.
The focus shifted last year when National Grid unveiled its contract with Cape Wind. Now, the developer faces a new hurdle: persuading the state’s highest court that state law allows for such a seemingly pricey contract.
Bob Rio, senior vice president at AIM, certainly doesn’t think so. He’ll join representatives from the Alliance to Protect Nantucket Sound (Cape Wind’s most vocal critic) and the New England Power Generators Association at the SJC on Thursday to make the opposition’s case.
In general, the critics say the price for Cape Wind is just too steep. They point to NStar’s recent contract with land-based wind farms for power that would be less than half of Cape Wind’s price. NStar, those opponents would remind you, obtained its price through competitive bidding and not sweetheart negotiations.
Rio’s group is particularly incensed about an aspect of the contract that would allow National Grid to pass on the costs of Cape Wind to all the utility’s distribution customers – even those who choose a competitive supplier for their electricity.
Most homeowners simply let National Grid buy electricity for them. But big industrial users – including many AIM members – have the wherewithal and incentive to shop for their own power and just pay National Grid for delivering the electricity to their doorsteps. Rio says many businesses that buy electricity in the competitive market will be charged $50,000 to $100,000 a year for power that they never use. The method of spreading out Cape Wind’s costs, AIM claims, is a key reason why the contract should be declared illegal.
There’s also a debate over a 3-percent figure in the 2008 state law, known as the Green Communities Act. AIM argues that this was meant to be a ceiling on how much renewable power a utility could buy under the law. Cape Wind’s supporters, meanwhile, argue that the figure is merely the floor. Rio says National Grid wants to exceed this threshold for Cape Wind.
Cape Wind spokesman Mark Rodgers points out that the 2008 law allows for direct negotiations – such as what happened between Cape Wind and National Grid – as well as competitive bids.
He says the Cape Wind contract provides a stable, predictable price, compared to the volatile nature of fossil fuel prices.
The bottom line on ratepayers’ monthly bills, Rodgers says, would be minimal: an increase of 1.5 percent for homeowners, and 2 percent for commercial customers.
Rodgers also says the law doesn’t require cost to be the only consideration. For example, he says job creation is a factor: Cape Wind could mean as many as 1,000 temporary construction jobs and 50 permanent jobs.
Cape Wind’s economic and environmental benefits are the main reasons the Patrick administration – of which the DPU is a part – is such an ardent supporter. The DPU and Cape Wind are scheduled to take turns defending the contract Thursday.
This isn’t the first time the Cape Wind issue has been before the SJC. One year ago, the state’s highest court sided with the wind farm developer in a legal battle over how the project’s transmission lines would be plugged into the region’s power grid.
All these lawsuits – and there are others pending – can’t help potential investors’ confidence in Cape Wind. But Rodgers says the biggest reason Cape Wind hasn’t landed the financing it needs is because it has only sold half of its power. The lack of financial support has pushed back the Cape Wind timeline yet again: Rodgers says he remains hopeful that construction could start by the end of 2012. That was once an end date for the project, not a start date.
Cape Wind boasts about its perfect record in batting away appeals – Rodgers says the opponents’ losing legal track record is now something like 0-14. The developer also regularly points to all the state and federal permits it has secured over the past decade.
But the fight over Cape Wind’s contract with National Grid underscores an important truth: All the regulatory permits and legal victories won’t add up to much if Cape Wind doesn’t have enough buyers for the clean, green power it wants to sell.
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