BOSTON—State utility regulators on Monday approved a 15-year power-purchase deal between the nation's first offshore wind farm and its first customer, saying the arrangement is in the public interest and its benefits exceeds its costs.
The Department of Public Utilities endorsed the deal between the utility National Grid and Cape Wind, a 130-turbine wind farm planned for Nantucket Sound. National Grid has agreed to buy half of Cape Wind's power, beginning in 2013, when developers aim to begin producing power.
The starting price is 18.7 cents per kilowatt hour -- about double today's price of power from conventional sources -- and increases 3.5 percent per year for the life of the contract. That charge covers electricity, capacity and renewable energy attributes.
Cape Wind foes argued the cost was too high and would be a huge drag on local businesses. They also said there was a plentiful supply of cheaper alternative energy, such as land-based wind, that could better help the utility meet its obligations under Massachusetts law to get 15 percent of its renewable power from renewable sources by 2020.
But utility regulators said Monday that a series of public hearings and examinations of evidence presented to officials assessing the deal led to a different conclusion.
"Approving it is in the public interest, because no other renewable resource in the region matches Cape Wind in terms of size, proximity to large electricity load, capacity factor, and advanced stage of permitting; and because its bill impacts are in the range of 1 to 2 percent," regulators said in a statement.
Advocates also said the contract had a minimal cost of about $1.50 a month to residential customers who use an average of 500 kilowatts monthly and would be a good deal in the long term, compared to volatile fossil fuel prices.
They said that a large-scale project such as Cape Wind was badly needed to meet the state's renewable energy requirements, and would bring numerous additional benefits, such as new clean energy jobs and climate change mitigation.
Cape Wind officials were jubilant over the approval. A rejection could have derailed the project.
"Today's approval validates that Cape Wind is a good value delivering clean energy without all of the associated costs of fossil fuels," Cape Wind President Jim Gordon said. "This long-term contract not only secures an abundant, inexhaustible clean energy resource but protects consumers from rising fossil fuel and environmental compliance costs."
Still, opponents took their frustration out on the Department of Public Utilities. Audra Parker, president of the Alliance to Protect Nantucket Sound, said the decision shows that the department "is becoming nothing more than a rubber stamp of Gov. (Deval) Patrick's misguided support of Cape Wind."
Opponents also plan to challenge the decision by appealing to the Massachusetts Supreme Judicial Court, Parker said.
On Monday, utility regulators also rejected a contract identical to the deal National Grid signed that would have made it easier for another utility to buy the second half of Cape Wind's power. No other utilities have yet indicated an interest in buying from Cape Wind.
Still, regulators said they could expedite a review of any contract that is identical to the National Grid one.
Early this year, Interior Secretary Ken Salazar approved Cape Wind during its ninth year of federal review. The $2 billion project is the first offshore wind project in the U.S. to sign a federal lease, and advocates say it will jump-start an offshore industry that lags behind Europe.