Massachusetts committee advances bill on clean energy 

“What we’re doing today is building on what we learned from that and trying to make improvements where we could,” Downing said.

Among the major changes: The bill requires utilities to buy enough renewable power to supply 7 percent of their electricity, up from 3 percent today.

Also, current law allows utilities to directly negotiate contracts with renewable power companies. The state’s two largest utilities, National Grid and NStar, chose that option with the proposed Cape Wind offshore wind project to produce contracts that critics say are overpriced.

National Grid agreed to a starting price of 18.7 cents per kilowatt hour for half of the output of Cape Wind, which would be located 5 miles off Cape Cod in Nantucket Sound and aims to be the nation’s first offshore wind farm. NStar’s deal for about 27 percent of the output, which is still being negotiated, is expected to come with an identical price. Land wind can be bought for roughly half the cost.

The new bill would require competitive bidding for all long-term deals for renewable power. Attorney General Martha Coakley said the competition will drive down costs and eliminate sweetheart deals, like the pacts with Cape Wind.

“Everybody realizes it’s very expensive,” Coakley said. “Going forward, we should probably take a lesson from that and do it in a more cost-effective way.”

Cape Wind, NStar and National Grid said they were reviewing the bill Tuesday and couldn’t comment.

Downing, a Cape Wind supporter, said he believes the project will be prove “cost-effective” in the way state regulators defined it when they approved the National Grid deal: not cheapest in terms of dollars and cents but worth the price for other benefits, such as jobs created, a cleaner environment and creating a large power source near a busy coast.

But he said competitive bidding was the way to move ahead, given the tight economy and the fact the federal cost-sharing on renewable projects lawmakers anticipated in 2008 hasn’t materialized.

That’s also why the state needed to reduce the yearly payout it gives utilities that agree to long-term deals with clean energy companies, Downing said.

Currently, they get a payment equal to 4 percent of the annual cost of the deal – worth about $5.7 million, for instance, to National Grid in the first year of its deal with Cape Wind.

But under the bill, the payout goes down to 1 percent.

No current or pending contracts would be affected by the bill, Downing said.

The state Department of Energy Resources didn’t comment on the bill’s mandated competitive bidding or the reduced annual payouts. But it said “increasing the percentage of renewable energy utility companies must purchase will ensure continued job growth, greater economic benefits and a cleaner environment for the people of Massachusetts.”

Bob Rio, a senior vice president of the Associated Industries of Massachusetts, said the bill has strong points, including the competitive bidding requirement and a provision ensuring better rate transparency. But he said requiring long-term power deals and the mandates to buy increasing amounts of renewable power skew the market and will hurt customers.

“It means the ratepayer is going to be on the hook, no matter what the market does in four, five, six years from now,” he said. “The ratepayer is taking all the risk.”