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Utility defends Cape Wind contract

National Grid says project is critical

By Hiawatha Bray
Globe Staff / June 5, 2010

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The utility company National Grid filed documents with state regulators yesterday defending its contract to buy electricity from the proposed Cape Wind energy project, arguing that the offshore wind farm is essential if the company is to meet environmental goals mandated by Massachusetts law.

“National Grid believes Cape Wind is a critical starting point to fill a gap in meeting renewable energy targets regionally,’’ said National Grid senior vice president Richard Rapp, in papers filed yesterday with the Massachusetts Department of Public Utilities, which must approve the agreement. “Without Cape Wind, the aspirations and requirements of the Commonwealth and the region cannot be met.’’

National Grid filed the documents in support of its 15-year deal to buy half of the electric power to be produced by the Cape Wind offshore wind farm. The utility has a second deal for the rest of Cape Wind’s power, but has said it will assign those rights to future buyers.

The network of power-generating windmills, to be constructed in Nantucket Sound, is due to begin operation in 2013.

The power to be generated by Cape Wind will be significantly more costly than current rates for electricity produced by burning natural gas or coal. National Grid plans to pay 20.7 cents per kilowatt-hour for the power when Cape Wind starts producing in 2013, compared to about 9 cents for conventional electricity today. The price paid by National Grid for the power would increase by 3.5 percent each year of the contract to account for inflation.

In its filing, National Grid calculated that it will pay a total of $3 billion for half of Cape Wind’s power over 15 years, and that the same power from conventional sources would cost between $1.3 billion and $1.5 billion.

The state’s Green Communities Act of 2008 requires power utilities in Massachusetts to obtain a portion of their electricity from renewable sources such as solar power installations or wind farms. National Grid’s deputy general counsel, Ron Gerwatowski, said buying the Cape Wind power would ensure that the utility complies with the mandate, and added that there are no good alternatives. “Cape Wind is essentially the largest renewable resource that’s available,’’ Gerwatowski said.

In fact, he said, even with Cape Wind, there aren’t enough renewable power projects in Massachusetts to enable the state’s utilities to comply with the mandate. “That gap, in and of itself, is telling us that we need to have Cape Wind in the mix.’’

National Grid also said the Cape Wind deal would help it comply with other mandates, such as a 2008 law requiring major reductions in the output of greenhouse gases.

Robert Rio, senior vice president of Associated Industries of Massachusetts Inc. and a critic of the Cape Wind deal, said the Department of Public Utilities should view the contract with a skeptical eye. “This is a complicated, expensive process, representing billions of dollars in additional ratepayer costs,’’ Rio said. “We need to make sure that the ratepayer is protected.’’

Hiawatha Bray can be reached at bray@globe.com.