DEPARTMENT OF PUBLIC UTILITIES APPROVES NSTAR CONTRACT FOR OFFSHORE WIND POWER
BOSTON – November 26, 2012 – The Department of Public Utilities (DPU) today gave approval to the 15-year power purchase agreement between NSTAR Electric Company (NSTAR) and Cape Wind Associates, following an eight-month adjudicatory proceeding.
The DPU concluded that the benefits of the contract exceeded its costs and that the agreement provides adequate protections for ratepayers. The contract will assist NSTAR and the Commonwealth in complying with the state's renewable energy and greenhouse gas emissions reduction requirements, moderating the system peak load demand, enhancing the electric reliability in the state, and creating jobs.
"This contract is another step forward in fulfilling the statutory renewable energy and greenhouse gas emissions reduction goals set forth in the Green Communities Act," said DPU Chair Ann Berwick. "It is clear that the Cape Wind facility offers significant benefits that are not currently available from other renewables. This contract supports the largest renewable energy project proposed in New England while providing protections to consumers against the volatility of fossil fuel prices."
The contract, which is for 27.5 percent of the output of the Cape Wind offshore wind facility, sets the base price – for electricity, capacity, and renewable energy attributes – at 18.7 cents per kilowatt-hour (kWh) for 2013, rising 3.5 percent annually. The contract terms are substantially similar to those of the contract between National Grid and Cape Wind Associates, issued by the DPU in November 2010.
The contract allows for upward and downward price adjustments based on a variety of contingencies. Among them is a provision that if actual project costs, as verified by an independent audit, fall to such an extent that the developer’s rate of return on debt and equity exceeds 10.75 percent, the contract price of electricity will be reduced to give ratepayers 60 percent of the benefit of the lower costs. If actual project costs are higher than anticipated and reduce this rate of return, the developer absorbs those losses without impact on rates paid by consumers. This mechanism in the contract assures that the developers of the project will not reap overly large profits.
The contract is expected to increase electricity customers’ bills by 1.3 percent to 1.4 percent for residential customers and one percent to 2.1 percent for commercial and industrial customers. On average, the bill of a typical NSTAR residential customer using 500 kWh of electricity per month will increase by $1.16 per month.
The order approving the contract was issued today, following three public hearings in NSTAR’s service territory held in May and two days of evidentiary testimony in August.
The DPU's order also found that NSTAR's method of solicitation of the contract, including NSTAR's use of individual negotiations, was consistent with the language of the Green Communities Act. In its earlier decision approving the power purchase agreement between National Grid and Cape Wind Associates, the DPU determined that the Green Communities Act allows for both individual and competitive solicitations.
With DPU's approval of this contract, the Cape Wind offshore wind facility has secured contracts for more than 75 percent of its output.