AG Coakley's Office Reaches Agreement in Principle with Cape Wind to Reduce Costs for Ratepayers
Agreement Reduces Rate of Proposed Contract by Approximately 10%, Reducing Costs for Consumers and Businesses by Up To $450 Million
The agreement in principle was reached today by the Attorney General's Office, Cape Wind Associates LLC, the Massachusetts Department of Energy Resources and Nantucket Electric Company and Massachusetts Electric Company, both d/b/a/ National Grid ("National Grid").
Under the terms of the agreement, ratepayers will realize a savings of up to $456 million during the 15 year life of both of the proposed contracts resulting from an approximately 10 percent reduction in the price for the full project.
There is potential for significant additional savings for customers, including up to $55 million related to federal loan guarantee savings, as well as savings for reductions in project costs, an option to purchase below market power in the future, and a contract price reduction under certain circumstances.
"On behalf of National Grid's customers, 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," said Attorney General Martha Coakley. "This agreement accomplishes two important goals - working to develop renewable energy, specifically off-shore wind in Massachusetts, and ensuring customers get the benefits of this project under a much fairer price than what was originally proposed. I want to thank all involved parties for their work in reaching this resolution, and I particularly want to thank Governor Patrick and Secretary Bowles for their work in helping to ensure that National Grid customers received a fairer deal under this proposed contract."
Under the original terms of the contracts as negotiated by National Grid and Cape Wind, the price of electricity from the Cape Wind project would start at 20.7 cents/kWh in 2013 and increase by 3.5 percent per year.
Pursuant to the agreement in principle, Cape Wind and National Grid agree to revise their contracts to achieve customer benefits by:
- Reducing the starting price of electricity for year 2013 from 20.7 cents/kWh to 18.7 cents/kWh with an escalation factor of 3.5% per year if the entire project is built. If only a portion of the project is built, the starting price will be capped at 19.3 cents/kWh;
- Adjusting the contract price downward if Cape Wind achieves savings by receipt of a federal loan guarantees or a reduction in construction costs;
- Limiting National Grid's ability to commit additional ratepayer funds to the Cape Wind Project through expansion of its contract with Cape Wind;
- Providing National Grid with the option of purchasing additional energy from Cape Wind, on behalf of ratepayers, after the expiration of the contracts at a significant discount from market rates; and
- Expanding an existing price match guarantee if Cape Wind develops additional wind projects and offers to sell their power at a lower cost.
In the coming days, the parties intend to submit a formal settlement agreement and revised contracts to the Department of Public Utilities. The revised contracts will be subject to full Department adjudicatory review. National Grid and Cape Wind have asked that the contracts be approved by November 15, 2010.
The Attorney General's Office of Ratepayer Advocacy serves as the utility ratepayer advocate and is authorized to intervene in administrative and/or judicial proceedings on behalf of consumers in connection with any matter involving rates, charges, prices or tariffs of any electric company doing business in the Commonwealth.
This agreement in principle was negotiated by a team under the direction of Jed Nosal, Chief of Attorney General Coakley's Business and Labor Bureau.