Nstar ratepayers could see their electricity bills balloon by as much as $382 million over 15 years under a merger deal with the state that forces the utility to buy energy from Cape Wind – a power premium that dwarfs a one-time $21 million customer credit touted yesterday by the Patrick administration.
“The merger has some good things in the early years, but once the Cape Wind contract kicks in, it will erase any savings that ratepayers will have gotten,” said Robert Rio of Associated Industries of Massachusetts, a group that represents some 7,000 employers.
Gov. Deval Patrick wrangled a slice of the savings Nstar and Connecticut-based Northeast Utilities expect through their proposed $4.7 billion merger, along with a four-year freeze on electric and gas rates.
“What we have is a landmark agreement for customers. It will protect ratepayers from rate increases now and into the future,” Patrick said.
But under the settlement, Nstar’s contract for 27.5 percent of Cape Wind’s power must be “substantially the same” as the contract of National Grid, which has already lined up to buy 50 percent of Cape Wind’s energy.
An analysis by the state Department of Public Utilities – the regulatory agency that will review Nstar’s new merger deal – found National Grid customers will likely be hit with “above-market costs” of $420 million to $695 million over the 15-year contract.
That means Nstar’s portion of Cape Wind would hike costs for the utility’s 1.6 million customers by $231 million to $382 million.
And factoring in falling energy prices, the availability of federal subsidies and whether the full, 130-turbine project is built, Nstar’s deal with Cape Wind could be even more expensive.
Cape Wind president Jim Gordon said regulators have found the project “provides a unique set of benefits for Massachusetts and is cost-effective and will place downward pressure on wholesale energy prices while avoiding the external costs of burning fossil fuels.”
The Boston developer appears primed to finally secure financing, thanks to pressure from the Patrick administration during the lengthy merger review that focused on rates and benefits to the state’s clean-energy agenda.
Nstar faces an early April deadline to consummate the merger that was announced in October 2010. CEO Tom May said the settlement comes after a year-long effort “to reach agreements that appropriately balance all of the interests affected by the merger.”
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