The Cape Wind project planned for Nantucket Sound was dealt a significant setback Tuesday as Massachusetts’ two biggest utilities announced that they are terminating contracts to purchase power from the wind farm because of the project’s failure to meet contractual deadlines.
Northeast Utilities and National Grid said Cape Wind had missed the Dec. 31 deadline contained in the 2012 contracts to obtain financing and begin construction, and had chosen not to put up financial collateral to extend the deadline, according to the Boston Globe.
“Unfortunately, Cape Wind has missed these critical milestones,” Northeast Utilities spokeswoman Caroline Pretyman said in an email obtained by the Globe. “Additionally, Cape Wind has chosen not to exercise their right to post financial security in order to extend the contract deadlines. Therefore the contract is now terminated.”
National Grid spokesman Jake Navarro said in a separate email that that utility was “disappointed that Cape Wind has been unable to meet its commitments under the contract, resulting in today’s termination of the power purchase agreement.”
Under the original agreement, Northeast Utilities’ subsidiary NSTAR had agreed to buy 27.5 percent of Cape Wind’s production, according to the Cape Cod Times. National Grid had signed on to purchase 50 percent.
According to Commonwealth Magazine, NSTAR officials said the project had failed to complete financing for the wind farm and begin construction by the end of last year, as required by contract. NSTAR said Cape Wind could have extended the deadlines for two additional six-month periods by paying a deposit of nearly $1.3 million, but chose not to do that.
“Without the power contracts, it is unlikely Cape Wind would be able to finance and build the 130-turbine project that sought to become America’s first offshore wind farm,” the magazine reported.
The terminations could also have a significant impact on the state and New Bedford. Gov. Deval Patrick, has poured more than $100 million into New Bedford for a facility to service offshore wind companies. Cape Wind was expected to be the first of many customers, but if it never gets built it could be a big blow for the city.
The business group, Associated Industries of Massachusetts, praised the two utility companies for terminating the deal.
“Associated Industries of Massachusetts and its 4,500 member employers strongly endorse the decisions by Northeast Utilities and National Grid to terminate their long-term contracts with Cape Wind,” John Regan, executive vice president for government affairs with the organization said in a prepared statement. “These power companies deserve tremendous credit for taking actions that will save customers billions of dollars that would otherwise have been spent buying electricity at the highest power price ever negotiated in Massachusetts.
Regan said that his organization, known as AIM, has consistently supported economically beneficial renewable power projects, but that it opposed this project because of the “staggering costs” that “would have saddled ratepayers for decades to come.”
Cape Wind spokesman Mark Rodgers told Commonwealth Magazine that the terminations are not valid. Rodgers said Cape Wind President James Gordon had already exercised clauses in the contracts, effectively suspending the deadlines because of events beyond the wind farm’s control, specifically a wave of lawsuits brought by opponents of the project.
Gordon, in letters to the two utilities on Dec. 31, said litigation against the project over the years mounted by the Alliance to Protect Nantucket Sound is “extraordinarily unusual, unexpected, and significant. It has been completely beyond Cape Wind’s control and could not have been prevented or avoided,” according to the magazine.
Audra Parker, executive director of the Alliance to Protect Nantucket Sound, said Cape Wind’s lease and power contracts are its two main assets. Without the power contracts, Parker said, it will be very difficult for Cape Wind to ever begin construction, the magazine reported.
Cape Wind officials had already conceded that they might have to build the project in phases because of the inability to find a buyer for the remaining power that was not covered by the agreements with NSTAR and National Grid, the Cape Cod Times reported.
“This is a fatal or near-fatal blow,” Parker said. “I think it’s very bad news for Cape Wind. Of course, it’s good news for Massachusetts ratepayers.”
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