PROVIDENCE — Nearly identical bills that would pave the way for National Grid to set up long-term contracts to purchase renewable energy have unanimously passed key committees in the House and Senate
If approved by the full chambers, perhaps as early as next week, it would help lead to the construction of wind turbines off Block Island and allow the island, which has some of the highest electric rates in the country, to utilize that power and — thanks to an undersea cable to be laid to the island — tap the lower-cost energy that National Grid purchases for the rest of Rhode Island.
Governor Carcieri’s office said Thursday that he supports the Senate version of the bill, which calls for a slightly lower payment for National Grid for the renewable energy it buys.
The legislation is considered vital to giving the Ocean State the first offshore wind farm in the country and, supporters hope, making the state the nexus for wind energy-related jobs in the United States.
Carcieri vetoed a similar bill last year. But that was before he signed a deal with Deepwater Wind Rhode Island for the offshore project. National Grid and Deepwater officials met for two days to hammer out the versions approved Wednesday evening.
“The compromise legislation has protection for rate payers and addresses the other issues of competition,” said Carcieri spokeswoman Amy Kempe.
Members of the House Committee on Environment and Natural Resources and the Senate’s Environment and Agriculture Committee didn’t get to see the revised bills until just before the vote.
J. Michael Lenihan, D-East Greenwich, was one senator who made it clear he was voting for the proposal to get it to Senate floor, but expected answers to some of his questions by then.
At Wednesday’s Senate hearing, there was no opposition to the proposal.
“It addresses the issue of the long-term contracts in a way that’s supported by environmentalists, developers and utilities,” said Jerry Elmer, staff attorney for the Conservation Law Foundation, who said the environmental group is “here standing shoulder to shoulder with Grid, supporting the bill.”
“This is the legislation that creates the foundation for us to move forward,” said Jim Lanard, managing director of Deepwater Wind. “This will put us in the forefront of offshore wind.”
When he vetoed the renewable energy bill last year, Carcieri expressed three concerns.
One was that it gave National Grid a 3-percent profit from its long-term contracts with alternative energy suppliers. Currently, when National Grid buys power, it passes the cost to the consumer without a markup.
The governor thought 3 percent was too high. The Senate version brings that down to 2.75 percent. The House version has kept the 3 percent profit, the only difference between the two bills.
The 2.75 percent markup still prompted questions from the Senate committee, with members asking why there needed to be any markup at all.
National Grid’s Ronald Gerwatowski explained that banks regard such long-term contracts as a risk to the company and, as a result, they may charge higher interest rates. The extra profit is designed to compensate for those higher borrowing costs.
“Rhode Island is really going out on an aggressive program,” he said, adding that if all the renewable-energy proposals being weighed by National Grid were to come to fruition, it would make up 15 to 25 percent of the power consumed in the state.
“That is unheard of in any other part of the country,” said Gerwatowski. “This is [the risk] the rating agencies see, and this is how we get downgraded.”
Elmer stressed that the 2.5-percent fee “only kicks in when the ratepayer gets the benefits and the electrons are flowing.”
Another concern raised in last year’s veto message was that the legislation singled out solar energy by mandating that solar make up at least five megawatts of the renewable energy mix. Solar power is generally more expensive than wind.
The amended bill retains the requirement but drops the requirement to three megawatts.
Bill Fisher, spokesman for Allco Renewable Energy, said his company lobbied for a solar mandate because solar is easier to develop than wind. “The green jobs are going to come from solar first,” he said.
Allco is planning an eight-megawatt solar power facility at the former Picillo pig farm Superfund site and will seek a contract with National Grid in July 2010. It could potentially be the first utility-scale solar farm east of the Mississippi.
The governor’s third objection: last year’s bill would have allowed National Grid to fulfill the requirements of the law by buying all its renewable energy from out-of-state sources.
Carcieri wanted the energy to be produced in Rhode Island so the state would benefit from the jobs created by the new technology.
The amended bill contains no new language on that issue.
Supporters say the matter is addressed in a provision of both the new and amended bills saying that all projects “regardless of their location, [shall] provide other direct economic benefits to Rhode Island, such as job creation, increased property tax revenues or other similar revenues, deemed substantial” by the Public Utilities Commission (PUC).
That provision still allows National Grid to buy renewable energy generated outside the state.
Deepwater’s Lanard said the amended bill is designed to open up the process. “All the other renewable energy projects will have the opportunity to work with National Grid,” and that provision, although not in the best interest of his company, was important to the coalition drafting the new version.
In fact, Rhode Island may reap most of the jobs-related benefits anyway because Deepwater has a big head start in Rhode Island thanks to the deal it signed with the state earlier this year.
The company, as part of its Block Island Wind Farm project, plans to have five to eight turbines generating 20 megawatts in state waters sometime in 2011.
By 2013 or 2014, it wants to have 100 additional turbines producing 385 megawatts for the state. That’s a more complicated project because the turbines would be erected in federal waters, 15 miles or so from land.
That Rhode Island Sound Wind Farm is expected to create 800 jobs.
The biggest objections, for now, seem to be coming from the PUC, which would have to oversee all of this.
Commissioners Elia Germani and Mary Bray, in letters to the heads of both committees, questioned the 2.75 percent profit National Grid would get from the projects.
“We don’t believe any incentive is necessary,” Germani said in an interview Thursday.
In addition, the PUC is supposed to determine the economic benefits of renewable energy projects. That “is beyond the scope of the Commission’s expertise and traditional ratemaking principles,” Germani and Bray warned in their letters.
Lanard said the PUC will need to move quickly.
Because of the worldwide economic downturn, European turbine manufacturers are facing a lull in demand, he explained. “Some of the orders for 2011 turbines were moved to 2012,” creating an opportunity for Deepwater to pluck its units off the assembly line much sooner than it would normally be able to get them.
That would make Rhode Island’s offshore project the first in the nation and the hub of offshore wind-power development in the United States — if the state can move quickly.
The truly new element of the amended legislation calls for setting up a rate system that would allow Block Islanders to tap power from both the Deepwater project and National Grid, reaping big savings on their electric bills.
That’s because Deepwater’s Block Island wind farm proposal calls for laying a transmission cable between the island and the mainland.
When the wind is blowing, islanders would take advantage of the electricity coming from the turbines. When it isn’t, the juice will flow in the other direction, and they will be able to get electricity from the mainland instead of polluting diesel generators.
Island residents now pay about 39 cents per kilowatt hour, said David Milner, general manager of Block Island Power Company. That’s more than two and a half times the cost on the mainland.
In addition, the transmission cable will have fiber-optic lines, allowing high-speed Internet, phone and television signals between the island and the mainland.
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