Patrick: NStar to buy Cape Wind energy in merger deal
Cape Wind, which won a no-bid contract to put up 130 turbines in Nantucket Sound and has priced its electricity above market costs, has been dead in the water because it’s been unable to sell half of the energy it is expected to produce. National Grid has agreed to buy the other half.
Under the deal with Patrick, Nstar agreed to freeze electricity and natural gas rates for four years and pass on $21 million in savings from the proposed $4.7 billion combination with Connecticut-based Northeast Utilities in the form of a credit on 1.6 million customer bills.
“What we have today is a landmark agreement for customers. It will protect ratepayers from rate increases now and into the future,” Patrick said in a press conference at the State House. “It’s good for ratepayers, for the environment and for our economy.”
If the Cape Wind project doesn’t break ground by 2016, Nstar is under no obligation to buy energy from the wind project, but it still would have to find an equal amount of clean energy from other sources.
“Our agreement comes after close to a year of thoughtful consideration by state agencies and our companies to effectively balance a number of interests,” said Nstar spokeswoman Caroline Allen. “We recognize Governor Patrick’s Green Communities Act sets important climate action goals and we feel having a diverse portfolio of renewable energy meets those goals in a way that is in the best interest of our customers.”
Patrick officials had thrown up repeated roadblocks during the long regulatory review, as Nstar balked at buying Cape Wind power and sought cheaper land-based wind farm contracts instead.
But the utility — facing an early-April deadline to consummate the merger deal that was announced back in October 2010 — finally blinked and agreed to concessions that were signed this morning with the Patrick administration and Attorney General Martha Coakley’s office.
Nstar CEO Tom May said the company’s proposed 15-year, 129-megawatt contract with Cape Wind along with existing wind contracts “will help meet the state’s clean energy targets.”
The Alliance to Protect Nantucket Sound, a Cape Wind opposition group, ripped the deal as “anti-consumer.”
“Ratepayers, municipalities and businesses will be saddled with increased electricity bills because of the state’s arm-twisting to force Nstar to purchase power from this wildly overpriced project,” said Audra Parker, the Alliance’s president.
The deal, which is still subject to Department of Public Utilities approval, should smooth the regulatory process for the merger, which is also being reviewed by Connecticut.
The DPU will hold a public hearing to review the Patrick administration’s deal, but commissioners will not issue a ruling until two days after Connecticut regulators make their own decision, which is expected April 2.
Cape Wind, expected to generate 1,000 jobs, has been in the works since 2001. The project has all necessary state and federal approvals but has been stalled by lack of financing and legal challenges.
“By including Cape Wind in this utility merger settlement agreement, Nstar and the Patrick administration are helping ensure that Cape Wind will supply up to 500,000 homes with locally harvested renewable energy and create hundreds of new jobs,” said Cape Wind president Jim Gordon.
“While future fuel prices are uncertain, the Massachusetts Department of Public Utilities has determined that Cape Wind provides a unique set of benefits for Massachusetts and is cost-effective and will place downward pressure on wholesale energy prices while avoiding the external costs of burning fossil fuels,” he said in a statement. “We are excited to move forward.”
Cape Wind won a key legal victory in December, as the Massachusetts Supreme Judicial Court upheld the DPU’s approval of the project’s 15-year power-purchase deal with National Grid. At that time, Cape Wind said it expects to start construction in 2013, delaying the time line by more than a year.
ISO New England, the region’s electricity grid manager, recently reported that it believes the Cape Wind project is “unlikely” to be up and spinning by mid-2015.
Peter Rothstein, president of the New England Clean Energy Council, said Nstar becoming a customer of Cape Wind “will accelerate increased investment in the clean energy innovation sector
Under today’s merger deal, NStar [NST] also agreed to hire an independent accounting firm to examine its financial reports and asset inventory from 2012 to 2015 in an “unprecedented level of transparency” to state utility regulators, Patrick said.
“If the DPU finds that the current rates are not justified, they will reject this agreement and the merger will not proceed without Nstar coming back to the table,” Patrick said.