Three weeks of hearings by the Massachusetts Department of Public Utilities (DPU) on the proposed power agreement between Cape Wind and National Grid boiled down to a fundamental question that has employers scratching their heads - how can paying twice the market price for Cape Wind electricity be considered cost effective?
DPU concluded hearings Friday on a proposal that would add $1 billion to the electric bills of National Grid customers to pay for Cape Wind, even though the utility could have purchased less expensive renewable power from other suppliers. National Grid has agreed to purchase 3.5 percent of its electricity - approximately 50 percent of Cape Wind’s output - at prices beginning at more than 18 cents per kWh and increasing at 3.5 percent annually.
AIM acted as an intervener in the hearings representing the interests of commercial and industrial ratepayers, who already face some of the highest electricity costs in the nation. Our cross-examination of senior National Grid executives and other principals in the proposed agreement established several important facts:
- Despite being part of a consortium of utilities that solicited competitive bids for renewable energy last year, National Grid ignored the proposals that were submitted and inexplicably negotiated individually with Cape Wind. There is no evidence Cape Wind even supplied a bid.
- Several renewable energy developers testified that they offered wind and other renewable power at rates well below that of Cape Wind. These developers said they sought to do business with National Grid, but were turned away.
- The method that National Grid would use to charge ratepayers for Cape Wind power violates the Massachusetts Green Communities Act. AIM witness Mark Garrett of Garrett Consulting submitted evidence that National Grid’s proposal to charge the excess cost of Cape Wind to all ratepayers, even those who do not take energy from National Grid, is at odds with both the Act and established ratemaking procedures. National Grid’s proposal would force customers on competitive supply, including scores of AIM member employers, to pay for power they do not receive and thus subsidize other customers.
- National Grid has exceeded a provision in the Green Communities Act limiting the share of renewable power a utility may purchase under a long-term contract to 3 percent of its total load. Surpassing the 3 percent limit for Cape Wind will add millions of dollars to ratepayer bills.
- Cape Wind will provide no environmental or other benefits that could not be obtained at far lower costs from other renewable power sources.
- National Grid justified its insistence on special treatment for its proposed billing method solely upon the fact that the utility is foreign owned (and subject to international tax rules), rather than upon any potential benefit to customers.
All of these machinations produced a contract that represents the highest price ever paid for energy in Massachusetts, far higher than the price being paid by other utilities that worked through the competitive process for renewable power.
Add the projected cost of Cape Wind to other recently approved or proposed National Grid rate increases - a recent $40 million general increase, a three-year $350 million increase for energy efficiency, a $40 million solar program and a proposed $56 million rate increase to install a smart grid - and the price of electricity becomes unsustainable for an already fragile Massachusetts economy.
AIM plans to file a post-hearing brief that will respectfully urge the Department of Public Utilities to reject the contract because it makes no economic sense and provides no unique environmental benefits. Other utilities, operating through a competitive process, have shown that cost-effective renewable power is available – let’s buy that power first.
The commonwealth will eliminate far more greenhouse gas by purchasing reasonably priced renewable power than by fixating on an expensive boutique project that threatens the economic stability of thousands of Massachusetts employers.