Amended offshore wind bill leaves out incentive for utility
Credit: Alex Kuffner | The Providence Journal | June 3, 2022 | www.providencejournal.com ~~
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If Rhode Island moves ahead with a plan to buy more offshore wind power, it will do so without asking ratepayers to reward the state’s dominant electric utility for signing new contracts with developers.
The amended version of legislation requiring the utility now owned by PPL Corporation to solicit another 600 megawatts of offshore wind power omits an incentive that in the original iteration of the bill was equal to 2% of the total value of any contract.
The payment would have added another $3.2 million a year to costs borne by the state’s 500,000 or so electric ratepayers, according to estimates by the Rhode Island Office of Energy Resources.
That was simply too much to ask of Rhode Islanders, said Sen. Dawn Euer, lead sponsor of the bill.
“I don’t think that ratepayers shouldering that cost makes any sense,” the Newport Democrat said in an interview.
On Wednesday, the Senate Committee on Environment and Agriculture, which Euer chairs, unanimously approved the amended bill, sending it to a vote of the full Senate next Tuesday. A companion bill in the House, which has not undergone the same rewrite, was heard by the Committee on Corporations last month, but a vote has yet to be scheduled.
Rhode Island Energy, the new name PPL gave the company long known as Narragansett Electric after officially buying it from National Grid last week, said it supports the expansion of offshore wind, calling it “a critical component to help the state meet its clean energy goals.”
But spokesman Ted Kresse said the company has concerns about the legislation moving through the Senate.
“Taking on such a large procurement of energy for our customers with a long-term commitment well before the project comes to fruition does carry risks,” he said in a statement.
The amended bill contains another important change. Long-term contracts are negotiated between the utility and developers and then go to the state Public Utilities Commission for approval. A clause in the bill would give the PUC the authority to rule on any disputed items in a contract proposal and then order the utility to sign a final contract.
The legislation was introduced at the request of Gov. Dan McKee’s administration, following through on a plan announced by his predecessor a year and a half ago. McKee stands behind the amendments, according to a spokesman.
“The governor supports the bill as amended that came out of committee last night and thanks the sponsors for protecting ratepayer interests while advancing clean, renewable energy in the Ocean State,” Matt Sheaf said in an email.
Offshore wind is widely seen as key to a state mandate to reach net-zero greenhouse gas emissions by 2050. Small and densely populated, Rhode Island doesn’t have the space for utility-scale wind farms on land or similarly-sized solar farms. But the ocean waters off Massachusetts and Rhode Island have strong winds and relatively shallow waters, making them extremely attractive to offshore wind developers.
The nation’s first offshore wind farm, a 30-megawatt demonstration project, was built near Block Island, and Rhode Island Energy has a contract in place to supply the state with another 400 megawatts of capacity from a project in development in Rhode Island Sound.
While the utility is getting an incentive equal to 2.75% of the value for the Block Island Wind Farm contract, there is no such payment for purchasing power from the larger Revolution Wind project.
When it owned Narragansett Electric, National Grid repeatedly argued that the incentive was necessary because the commitment it makes to long-term contracts with offshore wind developers can become a liability on its books. But when the Revolution contract came up for approval in 2019, the PUC concluded that the company failed to provide any evidence that its financial standing would be harmed.
Still, National Grid made the same argument when Euer’s bill came up for a hearing in March, saying not only that an incentive is warranted but that the 2% rate included in the legislation was too low. The company argued that without the payment its creditworthiness could go down and borrowing costs ultimately paid for by ratepayers could go up.
That, however, has yet to happen, despite the previous contracts the utility signed for offshore wind. The most recent credit report on the company from Moody’s makes no mention of risks from offshore wind contracts.
“They’re made whole for their costs,” Euer said of the utility’s obligations under the legislation. “I didn’t hear anything in the hearing or in follow-up conversations that remuneration is necessary.”
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