Some Rhode Island lawmakers are concerned a bill to push a wind energy project in the East Bay would expand the reach of the embattled R.I. Economic Development Corporation even as the agency is under fire for mismanaging the 38 Studios deal.
The East Bay Energy Consortium Act (S2870,H7592) would establish a quasi-public agency under the umbrella of the EDC. The law would allow the agency to issue bonds to fund green energy projects.
Supporters say they hope the nine communities would profit from a proposed wind farm in Tiverton and reduce their municipal electric bills.
State Rep.Laurence Ehrhardt – who was an outspoken critic of the 38 Studios deal in 2010 – said he is worried that,despite assurances from proponents, taxpayers would ultimately be left holding the bag if things fell through.
“Right now I’m concerned that we’re in a rush to set up a structure for a business transaction that no one has any idea what it might look like,” Ehrhardt, R-No. Kingstown, said. “I’m more concerned with the economics of getting any community in the state committed to a program that might be far more expensive, or certainly less profitable, than they might have been led to believe.”
One of the bill’s sponsors, state Sen. Louis DiPalma, said they learned from the 38 Studios controversy and have placed “clear language” in the bill that would protect taxpayers.
“There is no liability to the state or municipalities or the EDC,” DiPalma, D-Middletown,said.
The text in the bill states “the provisions of this chapter … shall not be deemed to constitute a debt or liability or obligation of the state or of any political subdivision of the state including a municipality.”
DiPalma said the risk would fall on the shoulders of the investors the consortium would line up to buy the bonds.
Jean Marie Napolitano, a Newport City Councilor and chairwoman of the EBEC, said the new agency would issue revenue bonds and would only go out looking for investors after signing a contract from National Grid. She said the deal with the utility would represent a “10-or 15-year deal” that would guarantee payment for power top the consortium.
Napolitano said “conservative” estimates are that each town could earn $200,000 in profits from the wind project.
But Ehrhardt says he’s “heard it all before” and he fears the group would come back to the General Assembly asking for taxpayer-backed equity to get the project off the ground.
“They are setting up a situation that can’t exist. A horse with no legs can’t run a race,” la said. “If their only security against which to borrow is the plant and revenue contract, that is impossible [to get investors for].”
Governor Chafee has also expressed reservations about the legislation. In a letter to the House Environment and Natural Resources Committee on Tuesday night, Chafee asked lawmakers to hold the bill for further study.
“I am fully supportive of municipalities’ efforts to explore opportunities to reduce electricity costs through energy efficiency,” Chafee wrote in the letter. “However, there is language in the legislation that I cannot support, including creating EBEC as a subsidiary of the Economic Development Corporation and the potential financial exposure the state would be subject to regarding the bond financing of this project.”
Chafee also expressed concern that the Barrington and Portsmouth town councils recently pulled out of the consortium and that Tiverton has not endorsed the legislation.
The towns’ departures”came as a bit of a surprise to us,” Napolitano said.
She suggested Barrington was upset over how members of the consortium would be picked. The legislation calls for each town to send three possible board members’ names to the governor, who would use those suggestions to appoint all nine.
Napolitano said the consortium can still exist even if a handful of the communities involved decide they want to opt out. Fewer members would mean more profits for the remaining communities, she said.
More of blow to the project was the decision by the House committee to heed the governor’s request and form a study commission to explore the legislation further.
“I’m heated,” Napolitano said in response to the governor’s letter.
The Senate version of the bill is still alive and will get a hearing, DiPalma said Wednesday.
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