Price cut for $4.5bn Cape Wind offshore wind project

August 2, 2010

Cape Wind's power deals still face a review by the Massachusetts Department of Public Utilities

The companies behind the multi-billion-dollar Cape Wind offshore wind farm, planned for Massachusetts waters, have agreed to cut the price of their two power purchase agreements.

The move came after Massachusetts Attorney General Martha Coakley asked developer Cape Wind Associates and utility National Grid to justify their contract rate for the 468-megawatt project.

The two firms have now agreed to an 18.7 cents per kilowatt-hour starting price, instead of 20.7 cents/kWh.

As before, the price will escalate by 3.5% a year from 2013.

The revised deal would also mean that if Cape Wind secures a federal loan guarantee, cost savings will be passed on to rate payers.

Ms Coakley said her intervention meant a $456 million cost saving for ratepayers over the 15 years of the project, and that this represented a 10% reduction in price for the full project.

The state’s Attorney General said: “We have reached an agreement that we believe is a much fairer deal for ratepayers and will reduce the proposed costs for consumers and businesses by up to $450 million over the life of the contract.”

Cape Wind Associates is aiming to develop the project at Horseshoe Shoal, an area in Nantucket Sound between Nantucket, Martha’s Vineyard and Cape Cod. The project is to use 130 turbines supplied by German manufacturer Siemens.

Revised

Under Massachusetts law, the Attorney General is authorized to intervene on behalf of consumers in connection with any matter involving rates, charges, prices or tariffs of an electricity company doing business in the Commonwealth.

National Grid is set to buy half the output of Cape Wind to supply to its customers, while a second PPA allows it to sell the remaining power to other utilities.

The revised agreements will see a 19.3 cents/kWh cap imposed on the starting price in the event that only a portion of the wind project is built.

National Grid will be limited in how much extra ratepayer funds it devotes to the project, but will have the option of purchasing more power from the wind farm after the expiration of the current contracts.

The revised contracts for Cape Wind will now be reviewed by the Department of Public Utilities. National Grid and Cape Wind are hoping to have final approval by November 15, 2010.

Opponents

Opponents to the Cape Wind project said on Friday that the settlement still left consumers “paying more than twice the current market rate for electricity”.

Associated Industries of Massachusetts, a lobby group for employers in the state, said the revised contracts still represented a “bad deal” for ratepayers, “well above the price of renewable power from other sources”.

The Alliance to Protect Nantucket Sound, a group of local opponents, also said the 10% savings over 15 years “will not do nearly enough to protect ratepayers and businesses” from the “more than $4.5 billion in additional energy costs”.

Audra Parker, President and CEO of the group, said: “Even after the Attorney General’s intervention, we still do not know the final cost of this project.”