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Updated on June 21, 2010

Who Needs Common Sense

How does one greedy man come to control the Massachusetts political system so completely? For that matter, how does he manage to exert such control over some aspects of national affairs? Lest anyone say such a question is odd, let us look at the ways in which Jim Gordon, CEO of Cape Wind Associates does control the inner workings of our legislature and regulatory agencies in Massachusetts. Three previous posts, Bully parts 1 and 2 and Cape Wind's Most Effective Lawyers, tell of this Boston energy developer's impressive influence in Washington, D.C. However, the real magic of Jim Gordon's Cape Wind is closer to home, in the Massachusetts State House, around the corner from Jim Gordon's own house on Boston's Beacon Hill.

Apparently it is not very difficult.

As we saw in the disastrous oil well blow out in the Gulf of Mexico, when a government agency is both advocate and regulator things can go very wrong. The U.S. Minerals Management Service was just that, an advocate for oil and gas exploration and a regulator charged with enforcing mechanical and environmental safety standards. MMS relaxed and even ignored many of its own regulations, then exempted BP from still others and the results are washing up on Gulf Coast beaches. It is important to keep the cheerleaders and referees separate, and easily identifiable.

A similar situation exists here in Massachusetts. The Commonwealth is the only state in the country in which the same person has authority over the three different areas of environmental protection, energy development and public utility rate regulations. Appointed by Governor Deval Patrick Ian Bowles serves as Secretary of the Executive Office of Energy and Environmental affairs. He has authority over six regulatory agencies. These individual agencies are the Department of Environmental protection, Conservation and Recreation, Agriculture, Fish & game and and both Energy Resources and Public Utilities. Four of these agencies are stewards of the natural environment and two of them are assigned the task of ensuring adequate energy supply and cost effective energy for consumers. Ominously, a recently passed law, the green Communities Act, instructs Bowles' department to be as well an engine of job creation through green energy advocacy. Administration officials point to this arrangement with the pride of true innovators while others see it as a way of stacking the deck against legitimate review of energy projects and gaining automatic approval of expensive green schemes such as Cape Wind. they clearly mis the point that ever more expensive energy, no matter how green, will drive out the jobs Massachusetts still has and attract few if any to replace them.

On its way to full approval, Cape Wind charmed the Energy facilities Siting board (EFSB) into ignoring, actually squashing any and all local permitting authority so that Cape Wind's marine power transmission cable will tear up the bottom of Nantucket Sound regardless of local opposition and then rip through the streets and woods of Yarmouth, again without the possibility of local opposition or even local input as to the course of work and how the affected areas will look when the work is done. So far the courts have sided with the Commonwealth. Now we have the Massachusetts Department of Public Utilities considering whether to approve a power purchase agreement (PPA) between National Grid and Cape Wind Associates.

From the start things could get rough for opponents of Cape Wind. At least one sitting commissioner of the DPU sat as a member of the EFSB and so has a history of both approving Cape Wind and telling local opposition voices to be silent. The first phase of the DPU process consists of three public hearings and the second of an evidentiary proceeding featuring testimony by approved interveners. Both National Grid and Cape Wind have filed written objections contesting the approval of intervener status for virtually every organization seeking it. To call this a fair process is not even a bad joke. The Commonwealth's Attorney General has been allocated up to $150,000 to pay outside experts to review the PPA. However, even that might be only a gesture because the Attorney General, Martha Coakley, publicly endorsed Cape Wind while running against Scott Brown to fill the U. S. Senate seat vacated by the death of Ted Kennedy. Mr. Brown stated his opposition to Cape Wind, won the election, and has not been heard from since on the matter of Cape Wind. Coakley's objectivity has been soundly discredited.

Jim Gordon held at least one fundraiser for then candidate, now governor, Deval Patrick. Gordon, his wife, people who work for him and their spouses all wrote checks to the Deval Patrick campaign. Doubtless Mr. Patrick was impressed by Gordon's wealthy Beacon Hill townhouse with its elevator. Dazzled or not he has been a strong Cape Wind supporter and simply will not listen to opposing points of view on the matter.

The actual PPA is an interesting, even amusing document. It is actually two PPAs. One calls for National Grid to buy 50% of Cape Wind's capacity for resale to its own electric customers and the other calls for National Grid to buy the remaining 50% and broker it to other wholesale buyers. Massachusetts electric transmission companies are required to purchase 4% of their energy from renewable sources by 2009 (OOPS!) and thereafter 15% by 2020 and 25% by 2025. None of this makes any sense to those of us who are simply asking how badly the retail rate payer will be hurt by the Cape Wind deal.

National Grid's proposed price is 20.4 cents per kilowatt in the first year. This price will actually be 4% higher because a recent Massachusetts rule making by the DPU allows transmission companies to charge a 4% premium on all renewable energy they transmit. No one knows why this is so; there is a 10.4% gross profit already allowed. Also, renewable energy retail rates are allowed by the Massachusetts Green Communities Act to rise at a compounding annual rate of 3.5%. The average Massachusetts residential electric rate is currently slightly over 12 cents/KW. By the end of the fifteenth year, the final year of the proposed PPA, Cape Wind's power will cost (based on a true levelized cost starting at 28 cents/KW)

So, after nine years of claiming that they will exert a downward pressure on New England electric rates, Cape Wind finally admits that over the next fifteen years they could actually cost New England electric customers a few billion dollars, and this before the entire renewable energy requirement is met. The possible increased costs to consumers are in the tens of billions of dollars. And, none of these costs addresses possible expenditures for massive grid upgrades and other measures to ease grid congestion and deal with the intermittent nature of wind power. Cape Wind is counting on receiving a 30% cash rebate based on the project's capital cost, the money coming from the American Renewal and Reinvestment Act, but if that rebate is not received, the proposed PPA would allow National Grid to raise the starting rate for Cape Wind's energy to over 24 cents/KW.

When Massachusetts passed its Green Communities Act the legislature, and presumably the Governor as well, made certain it contained a requirement that all green energy sold in Massachusetts must be produced and purchased in Massachusetts. This, along with other more financially technical aspects of Massachusetts law did not sit well with TransCanada a very large multinational energy company and so, TransCanada filed suit in the federal court for central Massachusetts. TransCanada has an asset value of nearly $50 billion and annual revenues of nearly $3 billion. they are a fifty-year old, highly respected company, a major force in North American energy. They claimed that Massachusetts was violating core sections of the U. S. Constitution and was not engaged in fair commercial practices. Massachusetts relented and has agreed that they will not conduct business in the same way in the future.

But, this calls into question the validity of the Request for Proposals (RFP) by which the National Grid - Cape Wind PPA(s) developed. TransCanada owns or controls 11,700 megawatts (MW) of energy generation. The Cape Wind project totals 468MW with an estimated actual capacity of only 180MW. 50% of that amount equals 90MW. TransCanada already has a land based wind farm completed in northern Maine. It, the Kibby Wind Farm, has a capacity of 132MW and TransCanada will sell that power to National Grid for 11 cents/KW.

Exactly how can the Massachusetts Department of Public Utilities claim to be doing its legally mandated duty, providing cost-effective energy to Massachusetts citizens, when they are actively promoting a PPA that will cost twice as much as necessary in its very first year? TransCanada's wind energy is actually cheaper than what the average National Grid customer now pays for conventional energy.

But, who needs common sense?


Copyright 2010 By Peter A. Kenney


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