SWANTON – Swanton Wind has met challenges in recent months from Vermont utilities and the Department of Public Service that seek to add another hurdle to its permitting process. At issue are the economics and electrical grid impacts of the project, concerns which regulators and utilities expect the developer to address before a contract to sell its power is blessed.
In August, Swanton Wind submitted for Public Service Board approval a Power Purchase Agreement (PPA) it hopes to enter with Vermont Electric Power Producers Inc. (VEPPI). Under the proposal Swanton Wind would sell its power according to a fixed price for the next 30 years.
The contract is proposed under the Public Utility Regulatory Policies Act of 1978 (PURPA), a statute designed to facilitate the development of small, renewable power producers in monopoly markets controlled by utilities.
Swanton Wind’s proposed contract, if approved, would be the first since the late 1980s. PURPA takes negotiating power from utilities and forces them to buy power from renewable sources at “avoided cost rates,” which are supposed to be set every year by the Department of Public Service and the Public Service Board. Many of the small hydropower dams in Vermont function under PURPA contracts.
The rates are fixed over the entire 30-year term, as is the case with all PPA contracts, and are designed to protect ratepayers from the fluctuations of the wholesale market. If utilities and producers bought and sold power at the wholesale rate as needed, the customer’s price would reflect those fluctuations, but the contract is designed to float the lows and the highs of the market and allow the customer and utility predictable rates.
Since the avoided cost rates were set in February 2015, the wholesale rates for renewable energy have plummeted, making the avoided cost contract less attractive to utilities.
Swanton Wind argues that it has a right to a PURPA contract at avoided cost rates as a matter of federal law, but others add qualifications to that right.
The Department of Public Service has argued to the PSB that the contract must be submitted in tandem with the Act 248 petition, so that the whole project can be evaluated at once, with all the facts under consideration.
“From our perspective, this application is incomplete,” commissioner Christopher Recchia said.
“Right now we can’t evaluate whether this contract should be approved because we don’t know whether it satisfies the criteria for approval. If the contract were approved before the project is permitted, we could end up with a situation where utilities have to assume they have power coming from Swanton Wind. That can cause real problems for power management if it does not get approved.”
But while doing the contract and the petition together makes sense for utilities and regulators, the opposite is best for developers.
Swanton Wind’s attorney Leslie Cadwell explained that permitting the project could cost hundreds of thousands of dollars, and without a contract, financing is hard to come by.
“Without a contract in place, it is extremely difficult to get into the 248 process because of the cost associated with it. A longterm, fixed-rate contract would allow Swanton Wind to complete financing that would make it possible. Without the contract, we may still move forward, but it is a much riskier move.”
But while the PSD is taking a wait-and-see approach to the overall assessment of the project, Green Mountain Power is not.
“If the PSB approves this contract it would cost our customers much more for this power than it would cost from other sources,”
said Kristin Carlson, spokesperson for Green Mountain Power. “We haven’t seen a PURPA contract requested in decades because renewable projects are becoming cheaper and more competitive. We just don’t think this is a costeffective option for our customers”
Carlson continued: “We don’t see how this project fits into our portfolio with wind. Right now, we want a diversified, small scale generation. Wind power is already nine percent of our portfolio, so we don’t see that we need any more.”
Other utilities in the region also have voiced concerns. Patty Richards of Washington Electric Co-op said her utility’s biggest concern is the project’s impact on grid reliability.
“What we want to see before this gets approved is a system impact study so that we would all know what would happen to the grid if we injected 20 megawatts at that point. There may not be enough transmission capacity to support it,” she explained.
Dave Hallquist from the Vermont Electric Cooperative agreed: “The problem is any generation in the northern part of the state will cause us to throttle back other renewable sources. If you build generation in the right place it will be helpful, but if it is in the wrong place, it is harmful.”
Hallquist, Richards and Carlson each said that their utilities do not need Swanton Wind’s power.
In an interview with the Rutland Herald last week, Gov. Peter Shumlin seconded their concerns, “We’re now at the stage in terms of the grid where if you build wind in the Northeast Kingdom, or if you build big wind in Franklin County, parts of Franklin County that are being proposed, again, you will have stranded renewables … You will have difficulty getting those into the grid without making extraordinary investments to the grid that will cost Vermont ratepayers money.”
Swanton Wind counters that grid reliability and cost are considerations which will be addressed in its petition, but by forcing Swanton Wind to address them before a contract can be approved is putting the cart before the horse.
“As a small, renewable producer, Swanton Wind has a right to an avoided cost contract,” Cadwell said. “Without that contract, it becomes much harder to questions answer those thoroughly. A contract allows us to get the financing we need to hire the best experts and do the best work possible to get the petition done right and get everyone’s questions answered.”
“We haven’t made up our mind about Swanton Wind yet,” Recchia said. “We will wait until we have the petition before we decide how to proceed.”
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