May 07, 2010, 12:15 PM EDT
By Christopher Martin
May 7 (Bloomberg) -- National Grid Plc, an owner of utilities in the U.S. and U.K., will seek regulatory approval to sign a contract to buy
half of the power output from the Cape Wind project off the coast of
Under the 15-year contract, National Grid will pay 20.7 cents a kilowatt-hour for the wind power output starting in 2013, and the price will
increase 3.5 percent each year, the Waltham, Massachusetts-based company said
today in a statement. Residential customers currently pay about 8 cents to 10
cents a kilowatt-hour, said Tom King, president of National Grid U.S.
U.S. Interior Secretary Ken Salazar last month approved the first wind farm in U.S. waters, a $1 billion project to install 130 Siemens AG
turbines in the shallow waters of Nantucket Sound. Cape Wind will generate
enough power for more than 200,000 average U.S. homes, the department said.
“Cape Wind is a catalyst for developing large-scale renewable-energy projects,” King said today at a news conference in Waltham,
Massachusetts. London-based National Grid delivers power to about 3.3 million
customers in the U.S. Northeast, including the island of Nantucket.
FAA Approval Needed
Cape Wind still needs approval from the Federal Aviation Administration because the turbines may interfere with tower-to- aircraft
transmissions. Developers must also get financing for the project, which may
cost more than double their $1 billion estimate, said Ethan Zindler, head of
North American research for Bloomberg New Energy Finance.
Cape Wind President Jim Gordon said he’s talking to utilities and power marketing companies in the region for the remaining 50 percent of the
project’s output, as well as bankers to finance it. He’s also talking to marine
construction firms for contracts to begin building the offshore wind farm by
the end of this year.
“Cape Wind is in intense negotiations,” Gordon said at the media briefing. “Cape Wind is convinced we will sell the other 50 percent.”
A legal challenge to the wind farm is pending in the Massachusetts courts, and more lawsuits are likely, according to Pat Parenteau,
a professor at Vermont Law School in South Royalton who specializes in ocean
and coastal resources.
Customer bills will increase by about $1.59 a month, National Grid estimated, based on forecasts of what customers will pay for power in
Cape Wind would generate a maximum of 468 megawatts from turbines spread over 25 square miles about 5 miles off mainland Cape Cod, in an
area known as Horseshoe Shoal.
--With assistance from Kim Chipman in Washington. Editor: David Marino, Richard Stubbe.
To contact the reporter on this story: Christopher Martin in New York at email@example.com
To contact the editor responsible for this story: Dan Stets at firstname.lastname@example.org
HYANNIS, Mass., May 7 /PRNewswire/
National Grid today announced that its ratepayers would purchase half of the power from the embattled
Cape Wind project at a premium for ratepayers of $442 million over the
course of the 15 year agreement. The total cost of the project’s power
would cost Massachusetts residential and commercial ratepayers an
additional $884 million in energy costs over the next 15 years. National
Grid and Cape Wind refused to release the full details of the rate hike
– which may be substantially higher based on the premiums businesses
will pay – until Monday.
“This confirms the worst fears of many Massachusetts ratepayers and businesses,” said Audra Parker, president and CEO of the Alliance to
Protect Nantucket Sound. “Massachusetts is already paying some of the
highest electric rates in the country – a burden that has forced
businesses to leave and families wondering how they will make ends
If approved, National Grid ratepayers would pay an additional $23 million in the first year of the power purchase agreement, and built-in
annual rate increases would eventually balloon the annual ratepayer
premium to an additional $37 million in the final year of the contract.
National Grid agreed to purchase the power at a rate of 20.7 cents per
kilowatt hour. This represents a 256 percent increase compared to the
current rate of electricity. Over the course of the contract, the
increases would balloon to 420 percent of the current cost of
In a recent survey conducted by the University of Massachusetts Center for Policy Analysis, a majority of consumers said they would not
be willing to pay more for electricity produced by wind turbines. Much
of the support for wind energy was based on the false assumption that
offshore wind will lower electric bills.
In a morning press conference both National Grid and Cape Wind refused to answer repeated questions about the total cost of the project
to ratepayers and taxpayers as a result of massive public taxpayer
subsidies – estimated in the billions of dollars – and necessary
electrical grid improvements that ISO New England has estimated at $10
Similar cost concerns in Rhode Island led that state to reject a proposed 20-year power-purchase agreement between an offshore wind
project and National Grid that nearly tripled rates for wind power from
the offshore project compared to current rates.
Political leaders, business groups and consumer advocates have all expressed concern about the impact of high rates on consumers and businesses across the Commonwealth due to Cape Wind.
“Cape Wind represents the most expensive renewable power imaginable and will burden ratepayers for years to come. The Governor should
condemn this contract as unaffordable,” said Robert Rio, senior vice
president at the Associated Industries of Massachusetts. “At a time when
we are being promised that renewable prices are coming down this
contract has a guaranteed increase. It does not make any sense.”
The $442 million rate hike comes five months after National Grid initially agreed to have its ratepayers purchase half of Cape Wind’s
power. That agreement was announced just days after Governor Patrick
approved a $44 million rate hike for National Grid. At the same time the
Governor was criticized for collecting thousands of dollars at a
fundraiser thrown by National Grid executives in the days following the
rate hike and Cape Wind power purchase agreement.
“This deal represents the worst kind of corporate welfare,” said Parker. “National Grid and Cape Wind stand to make millions on the backs
of Massachusetts ratepayers and businesses while the Patrick
administration looks the other way.”
The controversial Cape Wind project will cost taxpayers and ratepayers more than $2 billion to build – three times its original estimate.
That colossal cost is the driving force behind the sky-high electric rates it plans to charge Massachusetts customers in coming years.
Cape Wind, which wants to build 130 wind turbines off the coast of Cape Cod, and National Grid announced yesterday that they’ve reached an agreement to
start charging customers 20.7 cents per kilowatt hour in 2013 – more than
double the current rate of electricity from conventional power plants and
land-based wind farms.
Under the 15-year National Grid contract, the price of Cape Wind’s electricity would increase 3.5 percent each year, pushing the kilowatt price to
about 34.7 cents by the time the contract ends.
The current price of National Grid’s non-wind electricity is now about 9 cents per kilowatt. That means the cost of fossil-fuel generated electricity
would have to increase nearly four-fold just to keep pace with Cape Wind’s
prices over the next 15 years.
“I’m glad it’s your electric bills and not mine,” said Robert McCullough, president of McCullough Research, an Oregon energy consulting firm, referring
to Cape Wind’s prices.
He said Massachusetts would have been better off going with less costly land-based wind farms.
“Why are you spending billions (on offshore wind) when you can pay half that with traditional wind?” he asked.
The release of the Cape Wind-National Grid rate numbers, which still must be approved by the Department of Public Utilities, allowed experts for the first
time to calculate Cape Wind’s construction costs.
Experts now project it will cost at least $2 billion, and possibly in excess of $2.5 billion. Three sources familiar with the Cape Wind-National Grid
negotiations confirmed yesterday that Cape Wind’s final price tag will be above
Because of available federal tax credits, Cape Wind could reap about $600 million in taxpayer subsidies if the final cost is $2 billion, in addition to
its higher power rates.
Cape Wind president Jim Gordon yesterday again refused to say how much construction will cost, citing competitive talks he’s now in with construction
Cape Wind and National Grid, which is planning to buy half the energy the wind farm will produce, said their rate deal will add about $1.59 a month, or
about 5 cents a day, to the current ratepayer’s bill in 2013.
“The question is whether folks are prepared to pay five cents a day for a better energy future,” said Gordon.
Ian Bowles, Gov. Deval Patrick’s secretary of energy and environmental affairs, said the National Grid prices are competitive if renewable energy
credits are deducted.
But energy experts said the proposed National Grid rates, especially with the annual inflation adjustments, add up to a very high price.
“This would seem to me to be a most unwelcome additional energy tax” on customers, said Peter Beutel, an energy analyst at Cameron Hanover in