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Pacheco raises concerns on offshore wind pricing

Sen. Marc Pacheco of Taunton raised an interesting policy issue on Monday when he spoke out against a provision in the Legislature’s budget that would tweak the way the state procures offshore wind power.

Under legislation passed in 2016, each successive contract for offshore wind must come in at a price below the last one. The clause was inserted to protect ratepayers, but the winning bid of Vineyard Wind was so low that many are wondering whether companies will be able to come in below that price on the next procurement, particularly with a lucrative federal tax credit for renewable energy projects diminishing in value.

Rep. Patricia Haddad, the speaker pro tempore, pushed for language in the House budget that would retain the declining price cap but allow for a number of pricing adjustments, including for the availability of federal tax credits, inflation, incentives, and “mitigation efforts that, where feasible, create and foster employment and economic development in the Commonwealth.”

Haddad, who represents Somerset, is most concerned that if offshore wind prices keep dropping offshore wind developers won’t invest in onshore supply chains that could mean jobs and tax revenues for her district. She’s not alone. Associated Industries of Massachusetts has also called for similar adjustments to the declining price cap.
The Senate, which did not address offshore wind pricing in its budget, accepted the House language crafted by Haddad, although budget negotiators did insert language restricting its reach to only the current procurement for more offshore wind.

It’s not hard to see why the Senate went along with the House language. Sen. Michael Rodrigues, the chair of the Senate Ways and Means Committee and the branch’s lead budget negotiator, represents Somerset (Haddad’s district) and surrounding towns looking to cash in on the emerging offshore wind industry.

Pacheco, however, thinks the Legislature’s approach goes too far. He said he recognizes the price of future offshore wind procurements could go up as federal tax credits diminish. But he thinks the language included in the final budget is poorly defined (what are “incentives?” he asks), guarantees prices will rise substantially, and requires electricity ratepayers across the state to subsidize offshore wind development on the South Coast.

“The language goes way above what we should be doing,” he said on the Senate floor.

Pacheco is now calling on Gov. Charlie Baker to send the budget back with an amendment doing away with the declining price cap entirely.

What Baker will do is unclear. His administration is a big fan of keeping offshore wind prices as low as possible. The governor may try to keep the declining price cap in place, adjust the cap to reflect the disappearing federal tax credits (as a Boston Globe editorial suggested), or tinker with the legislative language in some other way to minimize price hikes.