Recent decision shows utilities are calling the shots | Bruce Mohl | CommonWealth | Nov 6, 2019 | commonwealthmagazine.org
The most recent offshore wind procurement exposed a major flaw in the selection process, as the state’s three utilities – and not elected officials and their staffers – were charged with making policy decisions about the direction of the Massachusetts offshore wind industry.
The procurement, the state’s second, attracted three bidders – Mayflower Wind, Vineyard Wind, and Bay State Wind. All of the companies stepped up their onshore investments with this procurement, but only Mayflower Wind spelled out its general strategy in the bid documents it released publicly.
The Mayflower strategy could have been taken right out of the children’s story Goldilocks and the Three Bears. Mayflower offered the state three options. The first bid offered the absolute lowest price for power and relatively little in the way of onshore investment. The second bid offered a slightly higher price for power and significantly more onshore investment – according to one source, as much as $20 million in port infrastructure, another $15 million in innovation and technology programs, and money for workforce training programs at Bristol Community College. The third bid offered a slightly higher price, all of the investments contained in the second bid, plus a new offshore wind tower manufacturing facility.
In each of Mayflower’s bids, the price was expected to be lower than what Vineyard Wind offered on the state’s initial offshore wind procurement. That price of 8.4 cents per kilowatt hour was hailed as a landmark low price.
When the Baker administration announced that Mayflower Wind’s low-cost option was selected as the winning bid last week, CommonWealth and other news outlets reported it was a Baker administration decision. Indeed, the announcement was made by Baker administration officials who seemed knowledgeable about all aspects of the decision, even though much of the pricing and other information is being withheld until the utilities negotiate an actual contract and it goes to the Department of Public Utilities for approval.
But Baker officials responded to the stories by demanding corrections because they said the decision was made by the state’s three utilities, not them.
According to Massachusetts law, state officials can participate in the drafting of the request for proposals and sit in on the selection process, but they cannot intervene in decision-making as long as the three utilities – Eversource Energy, National Grid, and Unitil – are in agreement on the winning bid. The selection of Mayflower Wind’s low-cost option was the first time in the state’s short history of procuring hydroelectric and offshore wind power that the utilities had been in agreement.
What all that means is that the policy choice between a lower price or more onshore investment was left to utility executives, and not the governor.
It’s unclear whether the decision would have been any different had the governor had a say. Baker has long favored going for the lowest price possible, on the reasoning that the rest of Massachusetts should not be asked to pay higher electricity prices to subsidize investment along the South Coast.
Advocates for the South Coast don’t buy the Baker administration’s claim that the decision was made by the utilities. Given the power dynamic between the Baker administration and the utilities, the advocates say privately that the utilities wouldn’t be voting for the lowest-price option if the governor and his staff didn’t want them to vote that way.
Asked for an explanation of the Mayflower Wind decision, a spokesman for Eversource Energy declined comment and referred all questions to Baker’s Department of Energy Resources.
In interviews last week, Baker administration officials offered no specific reason for choosing the low-cost option, other than the fact that it offered the best deal overall.
Rep. Patricia Haddad of Somerset, the third highest-ranking official in the House, said it’s starting to dawn on lawmakers that it was a mistake to put the state’s utilities in charge of the procurement process. She and many others on the South Coast have written letters to the Baker administration imploring officials to take onshore investment seriously. But now she finds out the Baker administration wasn’t making the decision, the utilities were.
Concerns have been raised in the past about the utilities evaluating project proposals from business ventures in which their own company is a partner. That happened on this second offshore wind procurement, as one of the bidders, Bay State Wind, is a partnership of Orsted Wind Power North America and Eversource Energy.
Haddad filed legislation in January to oust the utilities from the selection process and turn it over to a committee consisting of the secretary of energy and environmental affairs, the attorney general, the secretary of housing and economic development, and the House and Senate chairs of the Legislature’s joint Committee on Telecommunications, Utilities, and Energy.
Haddad is frustrated that the utilities and the Baker administration are fixated on price and ignore the long view of building an industry in Massachusetts. “For them, it’s just the lowest price,” she said. “That’s all [the governor] cares about. New Jersey or some other state is going to say, ‘Yeah, you got the lowest price and we’ve got all the jobs.’”
URL to article: https://www.wind-watch.org/news/2019/11/07/whos-in-charge-of-mass-offshore-wind-procurements/