Tuesday, October 4, 2011

Cape Wind shake down continues, and the gloves come off

Back in July I speculated that the Patrick Administration's decision to stomp down on the proposed merger of NSTAR and Northeast Utilities had less to do with a new-found concern for ratepayers than a leveraging of the regulatory process to force NSTAR to purchase the remaining 50% of Cape Wind's over-priced power.  Then in August I noted that NSTAR had cleverly found a way to fulfill a significant portion of its renewable energy quota by purchasing power from three land-based wind farms at a fraction of the cost of Cape Wind's juice.  Click on those links and skim over those posts if you have a moment - there is a lot of context that is important to fully understand the latest development in this sordid Green drama. 

BUY CAPE WIND POWER - The Green God commands it.
No time (lazy!)?  Here's the upshot: Last year National Grid (NSTAR's primary competitor in MA) agreed to purchase 50% of Cape Wind's projected output.  Much celebration ensued in the Patrick Administration, where questions of cost (Cape Wind power will cost consumers roughly twice what power generated using natural gas runs) take a distant back seat to such ephemeral benefits as "winning the future" and so-forth. 

Months later and the Patrick/Murray smiles have turned upside down, as National Grid's competitors have stubbornly refused to saddle their own customers with a huge price premium to appease the Green Gods of Massachusetts Politics.  That remaining 50% sits there despondent, with neither a purchaser nor any un-coerced prospects in sight.  Hence that regulatory foot on the throat of the NSTAR/Northeast Utilities merger.  

Hence now this from today's Globe:
Cape Wind Associates, the company behind the 130-turbine wind farm to be built in Nantucket Sound, are urging Massachusetts regulators to require that a merger between NStar and Connecticut-based Northeast Utilities include a condition to buy 50 percent of the power generated by the offshore wind project.
“Think big,’’ said Dennis Duffy, vice president of Cape Wind Associates, who last week filed a letter to the state Department of Public Utilities asking officials to make NStar and Northeast Utilities purchase “the remaining output of the CWA project.’’

Other groups watching the case, including the state Department of Energy Resources and the nonprofit Conservation Law Foundation, made similar entreaties, asking regulators to compel the utility companies to enter a long-term contract to buy electricity from a wind farm.

Cape Wind has been on the hunt for more customers since National Grid, one of the state’s largest utilities, agreed more than a year ago to purchase half of Cape Wind’s power. Securing another customer would cement Cape Wind’s viability, and help attract investors who can finance the wind farm’s construction. Many have long viewed NStar as the most likely candidate.
 It's that precious?  "The most likely candidate."  Most likely mark they mean..

See what is going on here?  Back in the summer when the Patrick Administration first announced its intention to muck about in the NSTAR merger it smirkingly denied any connection to Cape Wind's unwanted output ("smirkingly" because even at the time the Administration's energy spokesman could not help mentioning that the Governor  "considers Cape Wind an important project in terms of clean energy and jobs for the commonwealth...").

Now that a few more months have gone by and NSTAR remains infuriatingly unwilling to impose that price premium on its customers when it has perfectly viable alternatives to doing so, the Governor and his allies are done fooling around.
Private talks earlier this year between the state and utility executives involved in the NStar and Northeast merger apparently focused on restrictions prohibiting the companies from seeking new rate increases for a number of years, and a commitment to buy a significant percentage of the power Cape Wind expects to generate.

“We have had discussions with officials of NStar regarding the possible purchase of Cape Wind power by the utility,’’ said Mark Sylvia, commissioner of the state Department of Energy Resources. “To the extent that purchasing power from Cape Wind would have a positive impact on the state’s clean energy development and greenhouse gas reduction goals, it would be a welcome step.’’
Notice anything missing from that last part?  Hint: it is the same thing that is missing from the entire Globe article: any mention of the fact that Cape Wind energy is going to cost consumers significantly more than either power generated by natural gas (the majority of our juice these days) or power purchased by NSTAR from other wind projects.  Presumably that first condition - the "restrictions prohibiting the companies from seeking new rate increases for a number of years" will kick in only after the initial increase necessitated by the coerced purchase of Cape Wind's over-priced power.

'You wanna be cute, NSTAR?  You wanna go buying your green power from other sources.  Fine.  Gloves off.  We'll require you to buy from Cape Wind.  How you like them Green apples?'

In a way this is good.  Rarely is political abuse of regulatory authority so nakedly obvious.  If NSTAR continues to stand up to this bullying it is going to be hard for the Administration to step back and again claim that its actions with respect to the NSTAR merger are motivated by anything other than rank, radical environmental politics.

1 comment:

  1. Nice article Dan. There should be more outrage at the blackmail tactics being used by Gov. Patrick on NStar. To sum up the numbers, the Cape Wind/Natl Grid contract is $1.2 Billion above market, while NStar's contracts with three land based windfarms are $111 Million below market-bottom-line we can have green energy at a fraction of the cost of Cape Wind. But we can stop future overpriced contracts! Legislation has been filed to require utilities to use competitive bidding and contract with the lowest available rates-this bill would prevent situations like Cape Wind and save MA ratepayers from higher electric rates-call your State Rep & State Senator and tell them to support House Docket 4808!

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