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SHOULD CAPE WIND BE FREE?

Updated on July 15, 2010

SOMETIMES SILENCE IS THE SAFEST WAY

Cape Wind and National Grid are currently attempting to win approval from the Massachusetts Department of Public Utilities for a power purchase agreement (PPA). National Grid is proposing to buy 50% of Cape Wind's power and resell it to its own retail customers at more than twice the price of conventional electricity. It is not hard to imagine that this proposed PPA has caused quite a stir. The DPU is the state agency with direct authority over the contracts utility companies negotiate with energy suppliers and, in turn, over the rates charged to retail customers by those same utility companies.

However, there is another state agency, the Department of the Attorney General whose mandate includes very powerful consumer protection responsibility and authority. In fact, a favorable DPU decison could face a court challenge by the Attorney General. As things stand now the A.G. has filed a formal request for more information from Cape Wind about their costs and other financial data. The premise of this request is that while National Grid is restricted to a maximum markup on its generation charges and by this restriction customers are assured some level of cost effectiveness, no cost figures are yet available from Cape Wind to allow regulators to determine if Cape Wind's charges are fair or reasonable.

Because the proposed PPA calls for a huge increase in the price of Cape Wind's power versus conventional power and because Cape Wind has always been very secretive no one has ever been able to determine if Cape Wind's owners will make a financial killing at the expense of electric ratepayers. Federal law, the Environmental Policy Act of 2005, specifically grants authority to the Minerals Management Service (now called BUMMER) to hold confidential certain financial and proprietary information obtained from project applicants. The Massachusetts Attorney General does not appear to be on a witch hunt and is not trolling for material they can sell to the tabloids: they simply want to know if Cape Wind is giving people a good deal. And, it is their job to do so, to ask for substantiation of "cost effective" claims.

As one would expect, Cape Wind does not like being asked to prove their value and their attorney has filed a twelve page written objection to the A.G.'s request. On July 9 he wrote, as seen on page six, "Cape Wind's estimated or actual costs, proprietary financial data and estimated IRR (internal rate of return) do not determine the terms of the contract, nor do they dictate the ultimate cost to consumers; rather, only the end-result of national grid's agreement to purchase at the negotiated pricing in the PPA has that effect."

This, of course, should be great news to National Grid customers. It means that Cape Wind's costs have no effect on the price of its power and in theory, therefore, Cape Wind could sell its power for a lot less than what it is now proposing. The wind, after all, is free.

Copyright 2010 by Peter A. Kenney

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