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NU, National Grid Terminate Cape Wind Contracts

Posted by Bob Rio on Jan 6, 2015 9:12:00 PM

“Very bad news for Cape Wind. Very good news for Massachusetts ratepayers.”

WindTurbinesOceanSmallThat’s how one opponent of the proposed Nantucket Sound wind farm characterized the decisions by Northeast Utilities and National Grid yesterday to terminate their long-term contracts with the offshore wind farm. The two companies cited the fact that Cape Wind missed a December 31 deadline to obtain financing and begin construction, and chose not to put up financial collateral to extend the deadline.

This is one case of buyer’s remorse that will benefit virtually every Massachusetts employer and homeowner who buys electricity – the contracts would have placed ratepayers on the hook to buy Cape Wind power at an average of 25 cents per kilowatt hour over 15 years, more than twice the rate of power generated by on-shore wind facilities.

AIM and its 4,500 member employers, who have long opposed the contracts, strongly endorse the decisions by the two power companies to terminate their Cape Wind deals.

“Northeast Utilities and National Grid deserve tremendous credit for taking actions that will save customers billions of dollars that would otherwise have been spent buying electricity at the highest power price ever negotiated in Massachusetts,” said John Regan, Executive Vice President/Government Affairs at AIM.

“AIM has consistently supported economically beneficial renewable power projects that provide energy to commercial, industrial and residential customers at reasonable rates. The association opposed the Northeast Utilities and National Grid deals with Cape Wind - and challenged one in court – because the staggering costs of the project would have saddled ratepayers for decades to come.

“AIM thanks both Northeast Utilities and National Grid for their leadership in protecting the interest of ratepayers while committing to vibrant clean energy programs.  “ 

 

Northeast Utilities and NSTAR agreed to buy 27.5 percent of Cape Wind’s production amid withering pressure from the Patrick Administration during regulatory review of the two companies’ proposed merger. National Grid had previously signed on to purchase 50 percent.

AIM believes Cape Wind is symptomatic of state energy policies that have failed to live up to their promise while driving up electric bills for both employers and homeowners. The association believes that energy initiatives must benefit customers, who already pay some of the highest electricity rates in the country:

  • Long term contracts must be competitive bid. There should be no option for individual negotiations outside the bidding process.
  • The allocation of above market or below market costs of the long-term contracts needs to be fairly distributed across customer classes with no one class subsidizing the others.
  • Cost-effectiveness of long-term contracts should be defined clearly.

Topics: Environment, Energy, Cape Wind

Lawmakers Can Ensure Energy Supply without Bankrupting Ratepayers

Posted by Robert Rio on Jul 12, 2012 9:51:00 AM

The Beacon Hill conference committee currently hammering out an energy bill has a once-in-a-generation opportunity to put Massachusetts on a path of energy independence without bankrupting ratepayers.

EnergyHow? By crafting a bill that re-balances rate design and reforms a proposed requirement that utility companies purchase more of the long-term renewable power contracts that have already cost hard-working individuals and businesses billions of dollars on projects like Cape Wind.

The committee holds in its hands the power to jump-start a Massachusetts economy that has been saddled by the failure of the commonwealth’s centerpiece energy law – the 2008 Green Communities Act - to lower the cost of electricity. A balanced energy bill will ensure reliability and improve the bottom line of key Massachusetts industries that depend upon electricity, from traditional manufacturing to hi-tech data centers to municipalities, hospitals and universities

AIM and its member employers believe that the proposed Act Relative to Competitively Priced Electricity in the Commonwealth should enhance the parts of Green Communities that work and eliminate or reform those that do not. Our position reflects a belief that renewable generation based on sound market based economic principles can, unlike the current system, reduce prices while improving the environment and energy independence.

First, the good news. An Act Relative to Competitively Priced Electricity in the Commonwealth would resolve rate inequalities under which commercial and industrial ratepayers foot an increasing percentage of total electricity costs despite using a declining share of power. The proposed legislation would allow state regulators to allocate the cost of operating the electricity distribution system in proportion to the demand represented by each rate class.

Now the challenging part. AIM opposes sections of the bill that would allow electricity distribution companies like NStar and National Grid to increase purchases of long-term contracts for power and renewable energy credits from renewable providers without a  transparent competitive bid process. Long-term contracts, negotiated in back rooms, have left consumers and employers stuck with a $3 billion bill for power from Cape Wind. Three-quarters of all contracts for long-term renewable power have been negotiated outside of competitive bidding at a cost some three times that of market-based renewable power.

The protections should include:

  • Long term contracts must be competitive bid. There should be no option for individual negotiations outside the bidding process.
  • There should be a defined cap on the amount of power that distribution companies are required to solicit.
  • The allocation of above market or below market costs of the long-term contracts needs to be fairly distributed across customer classes with no one class subsidizing the others.
  • Cost-effectiveness of long-term contracts should be defined clearly.
  • There should be no other options for long-term contracts other than those specifically approved under this law

AIM also believes a section of the bill that requiring long-term contracts with new gas generating plans at the locations of existing coal or oil fire plants would harm consumers.

The prohibitive cost of energy is one of the key reasons that Massachusetts fell from sixth to 28th this week on CNBC’s annual ranking of the Best States for Business. The energy conference committee can help to restore the commonwealth’s ranking by taking real steps to reduce the cost of electricity in the Bay State.

Topics: Issues, Energy, Cape Wind

NSTAR Deal Offers Short-Term Savings, Long-Term Cape Wind Costs

Posted by Robert Rio on Feb 15, 2012 3:48:00 PM

NSTAR’s agreement to purchase power from Cape Wind to facilitate the utility’s merger with Northeast Utilities should create savings for ratepayers in the short term, but those savings will likely be offset in the long term by the staggering cost of the offshore wind project.

Energy costsState officials announced a settlement agreement this afternoon under which NSTAR will purchase 27.5 percent of Cape Wind power, likely the most expensive ever generated in Massachusetts.

The agreement, negotiated outside of public debate, is expected to pave the way for state approval of the proposed merger of NSTAR with Connecticut-based Northeast Utilities.

If approved by the state Department of Public Utilities, the negotiated settlement would freeze the base distribution rates for four years, benefitting customers of the merging companies – NSTAR Electric, NSTAR Gas and Western Massachusetts Electric Company (an NU subsidiary). It would also provide a one-time customer rate credit of $21 million for residential customers of the three companies – an amount that equals half of the estimated four-year savings the companies expect to net from the merger.

The settlement also requires the two utilities to restructure existing rates in the Western Massachusetts Electric service territory that currently result in commercial and industrial customers paying significantly more than the actual cost to serve them.

AIM has opposed power agreements with Cape Wind because the project's cost will burden employers who already pay among the highest electricity costs in the nation. The average electricity price in the U.S. for industrial customers in July 2011 was 7.39 cents per kilowatt hour (kWh) versus 13.87 cents for Massachusetts manufacturers.

National Grid has already committed to purchasing half of the power from Cape Wind. The Cape Wind/National Grid agreement was the first to be approved under a provision of the Green Communities Act that allows utilities to sign long-term contracts for renewable power directly with generators.

The Massachusetts Supreme Judicial Court in December rejected an appeal by AIM of the commonwealth’s approval of the National Grid deal.

Under terms of the proposed settlement, if Cape Wind does not commence “physical construction” (i.e., installation of equipment or materials into the seabed) before December 31, 2015, NSTAR can opt to terminate its power purchase contract with the wind farm. If that occurs, NSTAR agrees to solicit contracts no later than June 30, 2016 to purchase an equivalent amount of power (equal to 2 percent of the company’s total load) from new renewable energy resources qualified under the Massachusetts Renewable Energy Portfolio Standard for Class I renewables.

AIM is disappointed that a merger that would have been good for the ratepayer was basically used as an excuse to force the companies to purchase the highest-priced renewable power in Massachusetts history.

Recent competitively bid contracts have shown that renewable power can be purchased for one-third the price of Cape Wind AIM will review the agreements in detail to assess their full impact on employers.

Topics: NSTAR, Energy, Cape Wind

State Supreme Court Upholds Cape Wind/National Grid Power Agreement

Posted by Robert Rio on Dec 28, 2011 10:44:00 AM

The Massachusetts Supreme Judicial Court (SJC) today upheld the commonwealth’s approval of a power-sales agreement between National Grid and Cape Wind that will require thousands of employers to pay the highest power price ever negotiated in Massachusetts.

Cape WindThe ruling rejects arguments by Associated Industries of Massachusetts that the power sales agreement violates state law by forcing employers in Grid’s service territory to pay for Cape Wind power even if they do not use it. The SJC also ruled that the Massachusetts Department of Public Utilities had the authority to approve the 15-year deal, even though National Grid did not seek competitive bids.

The SJC, in an opinion written by Justice Margot Botsford, ruled that while the Massachusetts Green Communities Act does not explicitly address the authority of state regulators to approve cost-recovery methods for renewable power, “it is well established that the (Massachusetts Department of Public Utilities) has the statutory authority to rule on the appropriateness of proposed cost-recovery formulas.”

“(T)he department's decision in this proceeding is not precluded by the fact that the proposed cost recovery method is novel, particularly in light of the new emphasis on development of renewable energy in the (Green Communities Act)… The department permissibly determined that the environmental benefits of (the power purchase agreement) … will accrue to all National Grid customers, and it is therefore appropriate to require all customers to share in the costs of acquiring these benefits, in accordance with departmental precedent,” the court said.

Richard C. Lord, President and Chief Executive Officer of AIM, said the association respects the ruling of the court but is disappointed with the outcome.

“We continue to maintain that state regulators fell short of their responsibilities to consumers by approving this agreement at a time when other utilities were finding plentiful renewable electricity at less than half the cost of Cape Wind."

Massachusetts employers already pay among the highest electricity rates in the nation. According to the Department of Energy Information Administration (EIA), the average electricity price in the U.S. for industrial customers in July 2011 was 7.39 cents per kilowatt hour (kWh). The average price in Massachusetts was 13.87 cents per kWh, the highest rate in the continental United States.

The Cape Wind/National Grid agreement was the first to be approved under a provision of the Green Communities Act that allows utilities to sign long-term contracts for renewable power directly with generators. Other Massachusetts utilities such as NSTAR have since negotiated renewable power contract for much less than the 25 cents per kWh average cost of the National Grid/Cape Wind agreement.

The cost difference stems primarily from the fact that National Grid chose to negotiate with Cape Wind individually, outside a competitive bidding process, while NSTAR and the other utilities chose to bid their renewable power requirements competitively for generation anywhere in New England.

The legal challenge that AIM filed on behalf of employers and others was based upon three broad arguments:

  • National Grid’s allocation of the above-market costs of Cape Wind to ratepayers is inconsistent with the law and harms ratepayers on competitive energy supply;
  • The amount of the Power-Purchase Agreement exceeds 3 percent of total electricity demand in the National Grid territory and therefore exceeds the legal cap on the amount of renewable power utilities must purchase through long-term contracts; and
  • The National Grid/Cape Wind contract was not competitively bid.

The first issue was the most important for AIM member employers. National Grid has chosen to allocate the $1 billion in above-market costs of Cape Wind to all customers, even though the power will be funneled only to the customers who buy electricity from National Grid. That means businesses that buy power on the competitive market to help moderate their costs will be forced to pay extra money - tens of thousands of dollars in some cases – for power they do not use, essentially making them pay twice for electricity.

Topics: Issues, Energy, Cape Wind

Green Communities Act Pushes Up Energy Costs with Few Benefits

Posted by John Regan on Nov 9, 2011 7:07:00 AM

Massachusetts employers and residents who already pay some of the highest electricity bills in the nation face additional and potentially catastrophic rate increases to fund a hodgepodge of ill-conceived and conflicting programs created by the 2008 Green Communities Act.

Electricity CostsAssociated Industries of Massachusetts will today urge a legislative committee to look critically at the Green Communities Act and to modify elements that do not create benefit for ratepayers. The association believes that Green Communities, which was intended to provide stable electricity prices with the promise of renewable energy to moderate costs, has in many cases raised electricity bills that already run 86 percent above the national average.

The price increases caused by Green Communities are discouraging job creation, driving companies to other states and inhibiting the weak economic recovery in Massachusetts.

According to the Department of Energy Information Administration (EIA), the average electricity price in the U.S. for industrial customers in July 2011 was 7.39 cents per kilowatt hour (kWh).  The average price in Massachusetts was 13.87 cents per kWh, the highest rate in the continental United States.

The difference for commercial customers is about 35 percent, with Massachusetts the third highest. By comparison, North Carolina is 6.62 cents per kWh for industrial customers.

Green Communities contains vivid examples of inefficient solutions in search of a problem -  initiatives that spend significant money on “high hanging fruit” in hopes of improving the environment.

Equally problematic is the fact that the programs operate independently and without any review.

For example, the programs called net metering, smart grid, utility owned solar are all implemented on a per-utility level – each utility running its own program. These costs are not transparent on customer bills, but are buried in the distribution charge, making it impossible for consumers to understand. Some of these programs would benefit from being coordinated (if they are worthy of being kept at all).

Similarly, long term contracts for renewable power have been implemented in a way that not only defies logic but also impacts competition. NSTAR competitively solicited for renewable power under Section 83 and received multiple bids that ultimately resulted in costs close to parity with non-renewable power. National Grid, on the other hand, separately negotiated with Cape Wind for what is currently the highest price ever recorded in Massachusetts for power.

Green Communities programs are rationalized by the need to reduce greenhouse gases, even though Massachusetts is responsible for less than 1 percent of the carbon dioxide emissions from power plants in the United States. All of New England, in fact, contributes less than 1.8 percent of U.S. carbon emissions from power plants (sulfur dioxide and nitrogen dioxide are similar), meaning that Massachusetts has a negligible impact on the global emission profile. Reducing pollutants here will have a minuscule impact on worldwide levels.

“Businesses in Massachusetts are frustrated - frustrated because they feel they are being held responsible for reducing greenhouse gases far in excess of any other state and paying the brunt of the bill in a state that already is one of the top in the nation for clean air. This is combined with a perception that here in Massachusetts we will continually strive to outdo others no matter what the cost,” said Robert Rio, Senior Vice President at AIM.

Green Communities is also preventing patepayers from receiving the benefit of recent decreases in the price of natural gas. A three-year price decline that should have provided Massachusetts employers and residents with a 20 percent reduction in electricity costs has instead produced no reduction as ratepayers have been forced to fund Green Communities initiatives as part of the distribution and transmission portion of their bills.

And it gets worse - already on-the-books increases in transmission and distribution will add another 20- 30 percent to the price of electricity over the next one to two years.
 
AIM has suggested many changes to the Green Communities Act since it was passed. Our changes center around three major themes:

  • First, any program must use ratepayer money efficiently.
  • Second, all programs must have demonstrated benefits to the ratepayer and the cost must be transparent to the ratepayer.
  • Third, programs must be consistent with and maintain a vibrant competitive market that has been the law of the land here in Massachusetts for over 13 years.

“Clearly, we are risking an unprecedented increase in embedded utility costs from programs that are in some cases conflicting, overlapping or simply not cost-effective,” Rio said.

“In the end, the fundamental question to be answered is “Are the electricity policy decisions we are making the right decision for Massachusetts?”

 

Topics: Issues, Environment, Energy, Cape Wind

AIM Tells Court that Employers Would Pay Twice for Cape Wind Power

Posted by John Regan on Sep 8, 2011 11:38:00 AM

National Grid’s proposal to buy electricity from Cape Wind violates state law by forcing employers in Grid’s service territory to pay for Cape Wind power even if they do not use it, Associated Industries of Massachusetts told the state Supreme Judicial Court (SJC) this morning.

Robert RioRobert Rio, Senior Vice President and Counsel for the association, told the seven-member court that National Grid plans to allocate the above-market costs of Cape Wind to all of its distribution customers – both those who buy power from National Grid and those who buy electricity from independent marketing companies. He argued that state regulators should not have approved the cost allocation and urged the court to overturn the decision.

“They are not getting any benefit from the Cape Wind power. They are just paying for it,” Rio said of the competitive-service customers.

His arguments came as AIM and three other parties challenged the 15-year deal approved in November by the Massachusetts Department of Public Utilities (DPU) between National Grid and the proposed 130-turbine offshore wind farm in Nantucket Sound. AIM maintains that the deal will saddle ratepayers with the highest power price ever negotiated in Massachusetts. Other Massachusetts utilities such as NSTAR have since negotiated renewable power contracts at less than half the 25 cents per kWh average cost of the National Grid/Cape Wind agreement.

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Other critics argued this morning that the agreement should be overturned because it was signed as part of a process that was unconstitutional and because National Grid did not use an open bidding process to buy renewable energy.

Assistant Attorney General Kenneth Salinger, representing the the DPU, said regulators considered vast amounts of evidence in deciding that the agreement was cost-effective and in the public interest.

Rio told the justices that National Grid’s cost recovery plan, combined with the assertion by regulators that state law does not cap the percentage of electricity that distribution companies may purchase from renewable sources, means employers trying to manage their electricity bills using competitive suppliers will end up paying significant subsidies to basic-service customers.

Rio said that if National Grid decided to sell the Cape Wind power into the market, the law would permit the company to spread the difference between its buying and selling price to all customers. But National Grid lawyer David Rosenzweig told the court that National Grid, based in England, must comply with accounting standards that require it to use the power it buys.

A decision is expected by late 2011 or early 2012.

Topics: Associated Industries of Massachusetts, Energy, Cape Wind

State Supreme Court to Hear Appeal of Cape Wind Decision Sept. 8

Posted by John Regan on Aug 29, 2011 8:25:00 AM

The Massachusetts Supreme Judicial Court (SJC) will hear arguments September 8 from Associated Industries of Massachusetts and three other groups seeking to overturn the state's approval of a power-sales agreement between National Grid and Cape Wind. AIM believes the agreement would add $1 billion in unnecessary charges to the electric bills of businesses and consumers in National Grid’s service territory.

Cape WindRobert Rio, Senior Vice President and Counsel at AIM, and Robert Ruddock, General Counsel, will argue the appeal before the seven-member SJC on behalf of the association. Other parties challenging the agreement include the Alliance to Protect Nantucket Sound, TransCanada Power Marketing Ltd. and New England Power Generators Association.

A decision is expected in late 2011 or early 2012.

The 15-year deal approved in November by the Massachusetts Department of Public Utilities (DPU) will saddle ratepayers with the highest power price ever negotiated in Massachusetts and tens of millions of dollars in commissions that National Grid will receive for signing the contract with the offshore wind project.

The agreement was the first to be approved under a provision of the Green Communities Act (GCA) that allows utilities to sign long-term contracts for renewable power directly with generators.

Other Massachusetts utilities such as NSTAR have since negotiated renewable power contracts at less than half the 25 cents per kWh average cost of the National Grid/Cape Wind agreement. The cost difference stems primarily from the fact that National Grid chose to negotiate with Cape Wind individually, outside a competitive bidding process, while NSTAR and the other utilities chose to bid their renewable power requirements competitively for generation anywhere in New England.

The legal challenges by AIM and others are based upon three broad arguments:

  • National Grid’s allocation of the above-market costs of Cape Wind to ratepayers is inconsistent with the law and harms ratepayers on competitive energy supply;
  • The amount of the Power-Purchase Agreement exceeds 3 percent of total electricity demand in the National Grid territory and therefore exceeds the legal cap on the amount of renewable power utilities must purchase through long-term contracts; and
  • The National Grid/Cape Wind contract was not competitively bid.

The first issue is the most important for AIM member employers.

National Grid has chosen to allocate the $1 billion in above-market costs of Cape Wind to all customers, even though the power will be funneled only to the customers who buy electricity from National Grid. That means businesses that buy power on the competitive market to help moderate their costs will be forced to pay extra money - tens of thousands of dollars in some cases – for power they do not use, essentially making them pay twice for electricity.

The allocation is not only unfair but a direct violation of the law.

“We are hopeful that the Supreme Judicial Court will review the plain language of the law and disallow this unfair rate treatment,” said Ruddock.

In addition, without a cap on utility purchases, costs could increase multiple times when further contracts are approved.

Employers who wish to watch the SJC hearing may do so here at 9 a.m. on September 8.

Topics: Associated Industries of Massachusetts, Energy, Cape Wind

State Supreme Court Broadens Review of Cape Wind Approval

Posted by Robert Rio on Jun 17, 2011 11:58:00 AM

The Massachusetts Supreme Judicial Court will determine whether Massachusetts energy regulators should reconsider their approval of the Cape Wind/National Grid contract in light of evidence that other utilities bought renewable power at less than half the cost of the proposed offshore wind farm.

Cape WindA single justice of the SJC ruled yesterday that the court would review the Department of Public Utilities’ denial of a request by opponents to re-open the Cape Wind/National Grid case. Opponents sought to revisit the decision after NSTAR and other utilities used competitive bidding to find renewable power at between 9 and 11 cents per kilowatt hour, versus the 25 cents per kilowatt hour over 15 years provided in the Cape Wind deal.

The decision means that the state high court will hear two separate cases on the DPU approval of the Cape Wind agreement – one challenging its decision not to re-open the case and consider the additional evidence; and a second filed by AIM and others seeking to overturn the entire decision.

AIM has appealed the approval by the Department of Public Utilities (DPU) along with the Alliance to Protect Nantucket Sound, TransCanada Marketing and the New England Power Generators. 

“Had the DPU considered these lower-priced contracts, customers would have saved hundreds of millions of dollars. Now, the SJC will have the opportunity to determine the importance of this information," said John Regan, Executive Vice President of Government Affairs at AIM.

Opponents asked the DPU to re-open the case because the results from NSTAR and other utilities became public only after state regulators had already approved the contract between Cape Wind and National Grid.

The results from competitively bid contracts for renewable power obtained by other utilities is important because it shows that lower priced alternatives – with the same environmental attributes of Cape Wind - were available while the National Grid/Cape Wind discussions took place.  The evidence could have made a material difference in the analysis of the cost-effectiveness of Cape Wind and discredits the statements of National Grid’s witnesses and testimony. Cases may be reopened if material information becomes available.

AIM is appealing state approval of the Cape Wind/National Grid agreement because it will add $1 billion in unnecessary charges to the electric bills of businesses and consumers in the utility’s territory.

The 15-year deal approved in November will saddle ratepayers with the highest power price ever negotiated in Massachusetts and tens of millions of dollars in commissions that National Grid will receive for signing the contract with the offshore wind project.

The agreement was the first to be approved under a provision of the Green Communities Act (GCA) that allows utilities to sign long-term contracts for renewable power directly with generators.

AIM argues in its appeal that the DPU’s approval of the National Grid/Cape Wind deal was “arbitrary, capricious,” an “abuse of discretion and not otherwise in accordance with the law.” The agreement sets a dangerous precedent for allowing utilities to negotiate expensive power agreements outside of the competitive bidding process and to allocate the costs of those contracts unfairly to commercial and industrial customers.
 

Topics: Energy, Cape Wind

Massachusetts Energy Laws Threaten Economic Future

Posted by John Regan on Jun 8, 2011 1:21:00 PM

Massachusetts must reform a tangle of often-conflicting energy laws that have failed to live up to their promise while driving up electric bills for both employers and homeowners, AIM told a legislative committee today.

Electricity CostsAIM Senior Vice President Robert Rio told the Joint Committee on Telecommunications, Utilities and Energy, that the 2008 Green Communities Act and other laws that were supposed to reduce the oppressive cost of power in Massachusetts will instead raise the distribution portion of electric bills 50 percent by 2020. Rio urged the committee to approve two AIM-sponsored bills that would place controls on non-competitive power deals like the one between Cape Wind and National Grid that is set to add thousands of dollars to employer costs.

“Clearly, we are risking an unprecedented increase in embedded utility costs from programs that are in some cases conflicting, overlapping or simply not cost-effective,” Rio testified.

He told lawmakers that the high cost of energy in Massachusetts – 38 percent above the national average - threatens the ability of the commonwealth to sustain economic recovery.

“The negative impact that these high rates are having on our economy is accelerating as the economy falters and even healthy companies look outside of Massachusetts to trim operating expenses. The huge difference between our rates and the others, and the reasons for it need to be understood and addressed by this committee if Massachusetts is going to recover from this economic recession.

“Other industries with high electric costs – hospitals, universities and municipalities also are suffering. While they can’t move out of state for cheaper rates, the costs incurred by these facilities are passed down in the form of higher health care costs, higher tuitions and higher taxes, further eroding our competitiveness.”

Rio said it is a “myth” that Massachusetts companies have benefited from the Green Communities Act in the form of lower electricity costs. In fact, he said, the energy cost picture in Massachusetts relative to other states has not changed much at all, due to the fact that declines in energy costs have been eaten up by increases in transmission and distribution costs.

The two bills filed by AIM - SB 1679 and HB 861, both entitled An Act Relative to Competitively Priced Electricity in the Commonwealth – would modify the Green Communities Act  by making its language and intent  explicit and precise about costs, revenues and programs.

Here’s what the AIM bill would do:

  • Require competitive solicitations for long-term power contracts like the one signed by Cape Wind and National Grid. The original legislation allowed negotiations that are outside the public view and not transparent. Cape Wind was not competitively bid and is costing National Grid ratepayers 25 cents per kWh versus approximately 7 cents for similar power.

  • Allow out-of-state renewable generators to compete with in-state generators for long-term contracts with utilities. When NSTAR was able to seek competitive bids from both in-state and out-of state generators, it saw prices 40 percent lower than when it was limited to in-state vendors.

  • Allow ratepayers served by municipal light companies to access state funds for energy efficiency that are paid by their customers through the Regional Greenhouse Gas Initiative.

  • Require utilities to distribute accurate and timely itemized information to businesses to show the impact of rate increase.

  • Require utilities to itemize the cost of various programs for which customers are paying under the Green Communities Act.

  • Create a mandatory phase-in period (24 months or more) for any rate increase of more than 10 percent.

Use our Calculator | How Much Does Government Add to Your Electric Bill?

 

Topics: Massachusetts Legislature, Associated Industries of Massachusetts, Energy, Cape Wind

AIM Appeals Cape Wind Ruling; Cites $1 Billion in Unnecessary Charges

Posted by Robert Rio on May 20, 2011 1:54:00 PM

AIM filed an appeal with the Massachusetts Supreme Judicial Court today challenging the decision by state regulators to approve a power-sales agreement between National Grid and Cape Wind that would add $1 billion in unnecessary charges to the electric bills of businesses and consumers in the utility’s territory.

Cape WindThe 15-year deal approved in November by the Massachusetts Department of Public Utilities (DPU) will saddle ratepayers with the highest power price ever negotiated in Massachusetts and tens of millions of dollars in commissions that National Grid will receive for signing the contract with the offshore wind project. The agreement was the first to be approved under a provision of the Green Communities Act (GCA) that allows utilities to sign long-term contracts for renewable power directly with generators.

Other Massachusetts utilities such as NSTAR and Northeast Utilities have since negotiated renewable power contracts for what is believed to be approximately 9 cents per kilowatt hour – almost one-third of 25 cents per kWh average cost of the National Grid/Cape Wind agreement. The cost difference stems primarily from the fact that National Grid chose to negotiate with Cape Wind individually, outside a competitive bidding process, while NSTAR and the other utilities chose to bid their renewable power requirements competitively for generation anywhere in New England.

AIM argues in its appeal that the DPU’s approval of the National Grid/Cape Wind deal was “arbitrary, capricious,” an “abuse of discretion and not otherwise in accordance with the law.” The agreement sets a dangerous precedent for allowing utilities to negotiate expensive power agreements outside of the competitive bidding process and to allocate the costs of those contracts unfairly to commercial and industrial customers.

The legal challenges by AIM and others are based upon three broad issues:

  • the National Grid/Cape Wind contract was not competitively bid;
  • the amount of the Power-Purchase Agreement exceeds 3 percent of total electricity demand in the National Grid territory and therefore exceeds the legal cap on the amount of renewable power utilities must purchase through long-term contracts; and
  • National Grid’s allocation of the above-market costs of Cape Wind to ratepayers is inconsistent with the law and harms ratepayers on competitive energy supply.

The final point is the most important for AIM member employers.

National Grid has chosen to allocate the $1 billion in above-market costs of Cape Wind to all customers, even though the power will be funneled only to the customers who buy electricity from National Grid. That means businesses that buy power on the competitive market to help moderate their costs will be forced to pay extra money - tens of thousands of dollars in some cases – to subsidize the rates that others pay.

The allocation is not only unfair but a direct violation of the law.

“We are hopeful that the Supreme Judicial Court will review the plain language of the law and disallow this unfair rate treatment,” said Robert Ruddock, General Counsel of AIM.

Others groups have also appealed the DPU decision. Those groups include: TransCanada Power Marketing, the New England Power Generators Association and the Alliance to Protect Nantucket Sound. Their briefs have appealed the decision on the grounds that the contract was not competitively bid and the contract violates the Commerce Clause of the US Constitution.

Oral arguments before the Court are expected to take place in the fall.

Topics: Associated Industries of Massachusetts, Energy, Cape Wind

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