We all know that Deepwater Wind has proposed three mainland cable alignments, all of which have been withdrawn – revealing a lack of either concern for public opinion or expertise. And the scene has shifted to Scarborough State Beach to site the transmission line between the offshore wind farm and the mainland.
Since Deepwater Wind’s applications for easements before the State Properties Committee in December, it’s obvious it has adopted a strategy of requesting a string of permits, each involving narrow decisions. The company clearly wishes to avoid the big picture. Deepwater Resistance is very concerned with the big picture, among them the exorbitant rates for electricity approved by the Public Utilities Commission in 2010.
To illustrate the negative socioeconomic impact, we’ve developed a financial snapshot of this proposal based solely on figures from the 2010 PUC docket 4185 and Deepwater Wind’s 2012 Environmental Report. These figures are cumulative totals over the proposal’s 20-year life:
• Total revenue: $866 million
• Capital investment: $183 million
• Operation and maintenance costs: $176 million
• Total gross profit: $507 million
• Excess costs paid by ratepayers: $595 million
The last item is the extra cost all Rhode Islanders will pay above the anticipated future cost of electricity from all other sources, called the “standard offer.” If any of these figures or the basis for them is incorrect, as they may be since they’re 2 to 4 years old, we call on Deepwater Wind to issue an updated set of projections. Residential and business ratepayers should view the excess costs as equivalent to an annual $30 million state-mandated tax. The sole socioeconomic benefit is six permanent jobs.
In contrast to Deepwater Wind’s rate of 24.4 to 46.9 cents per kilowatt hour, the PUC has under consideration a tentative power purchase agreement between Champlain Wind and National Grid RI for power generated in Maine using land-based turbines at a price of about .09 cents per kilowatt hour and not including any cost escalation factor. It’s a matter of public record that both Connecticut and Massachusetts are actively negotiating power purchase agreements for terrestrial wind farms and solar generation at 8 to 9 cents per kilowatt hour.
At December’s Conference of New England Governors, in its closing policy statement, they endorsed the following alternative power sources: An upgraded regional grid, Canadian hydropower, solar, terrestrial wind and natural gas. Significantly omitted from their list was offshore wind. During an interview on Rhode Island Public Radio Jan. 8, Governor Chafee announced his endorsement of that compact.
Deepwater Wind’s scheme is much more than just a demonstration project. It should be considered a commercial-scale project designed to provide exorbitant profits for Deepwater Wind and Wall Street’s D.E. Shaw Group. Together, they will walk away with a $507 million profit before taxes. No regulated public utility would ever be allowed such a similar coup. Hardly seems fair, right? State Sen. Dawson Hodgson (R-Dist. 35) of East Greenwich, Narragansett, North Kingstown and South Kingstown, a candidate for Rhode Island Attorney General, recognizes the impact of this cost. Does the governor or the legislature have the $595 million cost to ratepayers on their radar?
Deepwater Wind should write a National Environmental Policy Act-compliant environmental impact statement because first, the venture is a private, for-profit company and second, it is not a minor project, as evidenced by its $866 million anticipated revenue. In fact, this project is hyper-profitable when gauged by the profitability expected of electric utilities. In my entire career as a chemical engineer in private industry, no demonstration project I ever witnessed had revenue intentionally planned to exceed costs.
Deepwater Wind should be required to renegotiate the rate structure to make it profit neutral and scale back the venture’s size. Simple arithmetic reveals it would still make a small profit if its charge for electricity were reduced to 15 cents per kilowatt hour with a zero escalation factor. Remarkable! We invite the Public Utilities Commission to verify this estimate.
The turbine array should be downsized; Deepwater Wind seems to have overlooked the fact that one, six megawatt turbine at peak output would be more than sufficient to meet the island’s maximum demand. The cable’s capacity could be reduced to 12 megawatt, still twice peak demand, and the cable’s cost fully socialized. Now, that’s a demonstration project.
In the private sector, a contractor with a three-year record of three design failures would have been fired for incompetence long ago. It’s time for the state to remove the undersea cable totally from Deepwater Wind’s responsibility and require National Grid to engineer and lay the cable. National Grid has the expertise to do it; Deepwater Wind does not.
Nobody looking at the big picture and truly concerned about excess costs to consumers in our state’s weak economy would approve Deepwater Wind’s latest scheme.
The author is the chairman of Deepwater Resistance.
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