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Merger may force purchase of Cape Wind electricity

The largest Massachusetts-based investor-owned electric and gas utility in the Bay State may be forced by political pressure to buy Cape Wind’s high-priced electricity—a purchase it has so far resisted.

A pending merger between NStar, which transmits and delivers electricity and gas to 1.1 million electric customers in 81 Massachusetts communities, and Northeast Utilities, a Connecticut-based Fortune 500 energy company that operates New England’s largest energy delivery system, may force NStar to buy Cape Wind electricity, the Associated Press reported.

“Since the merger was announced last year, regulators added a requirement that such deals must advance the state’s clean energy goals, which include developing offshore wind. The state also made a request, still pending, to stay proceedings for a review of the merger’s effect on rates—a lengthy process that could lead to a merger-killing delay,” the report said.

Republication state Rep. Bradley Jones, minority leader in the House, said the state’s strategy is calculated to pressure NStar to buy power from “a favored developer,” the report said. Jones called the regulators’ move “the great administration shakedown of NStar.”

Cape Wind’s controversial proposal is touted by the Obama administration as America’s first offshore wind farm and has been enthusiastically supported by Massachusetts Gov. Deval Patrick’s administration. The project of 130 turbines towering 440 feet above ocean level and spreading across almost 50 square miles of Nantucket Sound would obliterate the Mashpee and Aquinnah Wampanoag Tribes’ unimpeded view of the rising sun that is crucial in a ceremony that is central to their identity, and destroy the ocean bed that was once dry land where their ancestors lived and died. The plan also includes a 10-story electrical service platform with 40,000 gallons of transformer oil and 1,000 gallons of diesel fuel and a helicopter pad, a 66.5-mile submarine transmission-cable system, and two 115-kilovolt lines totaling 25 miles connecting to the mainland power grid.

Last year, the Massachusetts Department of Public Utilities approved a power purchase agreement for Cape Wind to sell half of its power to National Grid for 18.7 cents per kilowatt-hour (kWh) with a 3.5 percent increase each year, bringing the cost to 30 cents per kWh by the end of the 15-year license. Massachusetts’s consumers paid around nine cents per kWh last year. In June the Massachusetts Supreme Judicial Court dismissed a motion by Cape Wind that would have suppressed evidence that its power purchase contract with National Grid is two-and-a-half times the cost of green energy from other providers. The motion was in response to an appeal filed by Alliance to Protect Nantucket Sound, the Associated Industries of Massachusetts, TransCanada and the New England Power Generators Association to have the agency reopen its review of the agreement after an announcement that NStar was able to secure cheaper power from land-based renewable-energy projects. NStar is paying less than 10 cents per kWh for its power from three New England wind farms.

The Massachusetts representative is not alone in his assessment that NStar is being shaken down by the Patrick administration. Environmental attorney Robert F. Kennedy Jr. accused Patrick’s administration of “trying to hold hostage the proposed NStar-Northeast Utilities merger unless the two electric companies agree to buy Cape Wind’s power,” the AP reported. But the state says it’s just upholding the law and protecting the public interest, the report said.

Asked if the filings for a stay of the merger were related to Cape Wind, Department of Energy Resources commissioner Mark Sylvia said, “No.” But he also said the state is in discussions with NStar about buying Cape Wind’s power and such a purchase would be “a welcome step,” because Cape Wind would help meet various clean energy goals, including installing 2,000 megawatts of wind energy by 2020.

Asked if a purchase would affect the state’s decision to pursue the merger stay, the AP reported that Sylvia said: “We’d drop our motion to stay, ultimately, if NStar could demonstrate how the proposed merger would result in a net benefit to ratepayers and the commonwealth’s clean energy goals.”