State’s Cape Wind-NStar agreements could end up costing consumers money 

The Patrick administration touted this week’s NStar-Cape Wind agreements as a way for consumers to save money on electric rates. But it’s possible that we’ll actually end up spending extra money on our electricity in the long run once all the changes are calculated.

There were essentially two agreements with state agencies that were unveiled this week that will let NStar’s merger with Northeast Utilities go forward, and provide a big boost for Cape Wind Associates’ efforts to finance the 130-turbine wind farm proposed for Nantucket Sound.

One resolved a rate case in which NStar and NU agree to a short-term freeze on distribution rates and a onetime credit on electric bills. The second involves NStar’s renewable purchases, including a contract to buy 27.5 percent of Cape Wind’s power.

The onetime credits provide $21 million for NStar Electric, NStar Gas, and NU’s Western Mass. customers that will show up on bills in a month after the merger is completed. The average residential customer for NStar Electric will get $11, and the average residential NStar Gas customer will get $9, according to figures from Attorney General Martha Coakley’s office (customers who have NStar for both services will get credits for both). At NU’s Western Mass. Electric division, the average residential ratepayer would get about $7.50.

There’s the freeze on base distribution rates (a portion of your electric bill, not the whole thing) for 2013, 2014 and 2015. Coakley’s office estimates the freeze would save $50 million a year over three years for NStar’s electric customers, and $15 million each year for NStar’s gas customers. That’s a rough projection based on the increases that Coakley’s staff believes NStar would have sought. But a Coakley spokesman said he didn’t have a breakdown of what that means for a typical homeowner.

Then there’s the requirement that NStar purchase power from the Cape Wind project – power that would be priced well above the current market conditions. A spokeswoman for Gov. Deval Patrick’s environmental agencies says the estimated extra cost for a typical NStar residential customer would start at less than $1 a month over the span of NStar’s 15-year contract with Cape Wind.

The bottom line? While it’s impossible to know what will happen with energy markets 15 years from now, there’s a good chance that consumers could end up paying more for electricity as a result of these agreements by the time the contract ends.

For homeowners it might not be much. For industrial users of power, these dollars could add up quickly. That’s why Associated Industries of Massachusetts has been adamantly criticizing this NStar agreement to buy Cape Wind power (as well as a similar agreement that National Grid made in 2010 to buy half of Cape Wind’s power). AIM’s Bob Rio says the Patrick administration shouldn’t have held the NStar-NU merger hostage just to force the companies to agree to buy expensive electricity from Cape Wind.

In the end, a good argument can be made that this Cape Wind-NStar deal is a worthwhile investment in our region’s energy infrastructure – an important step to reduce our dependence on foreign oil and increase our reliance on renewable sources. But it’s much tougher to make the argument that these agreements are going to bring any sort of real savings to ratepayers.