Thursday, February 16, 2012

A good deal for ratepayers and for offshore wind

NStar's agreement to purchase a significant percentage of the electricity that will be generated by the proposed Cape Wind offshore wind farm is great news for those committed to building a sustainable society powered clean energy.

Congratulations to all who worked hard to make this happen. (GW)

Cape Wind deal part of merger agreement

The Patrick administration has reached a deal with NStar for the purchase of more than a quarter of the power expected to be generated by Cape Wind as part of an agreement to facilitate the merger between the company and Northeast Utilities.

Gov. Deval Patrick plans to announce agreement terms between the Department of Energy Resources (DOER) and NStar today. Details still require approval from the Department of Public Utilities for the merger to move forward.

As part of the deal, the new company will also agree to a cap on electricity rates for the next four years, and to share half of the savings projected as a result of the merger - or $21 million - with businesses and households in the form of rate credits for NStar electric and gas customers and Western Massachusetts Electric customers.

According to Secretary of Energy and Environmental Affairs Richard Sullivan Jr., the average household would see a one-time savings of $12 to $15 and any job reductions as a result of the merger would also be prohibited under the agreement from disproportionately impacting Massachusetts.

Sullivan said the conditional agreement with NStar and DOER, which also involved Attorney General Martha Coakley, would still be subject to a complete review by the Department of Public Utilities, and the companies will still have to justify the merger's savings and existing rates.

“They need to make sure the current rates and rate freezes moving forward are appropriate and in the best interest of the ratepayers,” Sullivan told reporters on conference call. As part of the deal, the DPU will not issue its decision on the merger until at least two days after Connecticut regulators issues their own ruling, Sullivan said.

The company, which would be known as Northeast Utilities moving forward, has agreed to purchase 27.5 percent of Cape Wind's energy, giving the offshore wind project a major victory and ensuring that more than three-quarters of the power form the project now has a buyer.

With National Grid previously agreeing to purchase 50 percent of Cape Wind energy, the deal could provide enough financing for the project to begin construction while buyers are sought for the remaining power.

If for whatever reason Cape Wind does not go forward, Northeast Utilities has agreed to purchase a comparable amount of renewable energy from another project in Massachusetts.

Sullivan said he would not comment on what the agreement means for the future of Cape Wind or where the project could sell its remaining power, but called the deal consistent with the state's energy goals. “I do think this agreement clearly shows the commitment this administration has had for the Cape Wind project specifically and the clean energy agenda in Massachusetts in general,” Sullivan said.

The merger between Northeast and NStar was proposed in October 2010, but has stalled as regulators have raised questions about consumer rate protections and service. Headquartered in Hartford, Northeast serves roughly 2.1 million customers in Connecticut, New Hampshire and Massachusetts, while NStar, based in Boston, has 1.4 million customers in Massachusetts.

Under the agreement, the new company has committed to retain the current level of service, which Sullivan said held particular importance in western Massachusetts with Western Massachusetts Electric being part of the deal as a subsidiary of Northeast Utilities.

The joint company, based on its initial merger plans, would operate six electric and gas utilities in three states, with nearly 4,500 miles of electric transmission lines, 72,000 miles of electric distribution lines and 6,000 miles of gas distribution lines.

Northeast president and CEO Charles Shivery will become chair of Northeast Utilities and Thomas May, president and CEO of NStar, will become president and CEO of Northeast Utilities under the proposed merger.

Coakley in November called for a five-year freeze on rates as a condition of the merger to ensure that increased profits are not being used only to pay shareholders.

In the wake of recent storms last year that generated widespread criticism for poor response times to outages, Senate President Therese Murray this week faulted the power companies for scaling back to the point where they don't have enough line crews to adequately respond to widespread outages.

Though utilities often rely on crews from out of state for mutual assistance, when storms like Tropical Storm Irene hit the Northeast it can take time to bring crews from other regions.
"Perhaps they should have the manpower. Northeast Utilities that wants to merge with NStar had a horrific response in Connecticut, and if they're going to merge we need some oversight," said Murray, discussing a bill the Senate plans to take up on Thursday addressing communication with customers and an assessment to help cover the cost of state oversight investigations.
"Beef it up because you can't tell me they're not making a profit," Murray added.

The agreement between DOER and the utilities does not directly address storm preparedness or response times, though there are measures to increase transparency of operations and give DPU a greater oversight role.

Sullivan said for the first time ever the joined utility would agree to provide audited financials of the company's operations, costs and revenues at their own expense when they come before the DPU in 2016 for their next rate case after the four-year freeze expires.

“This does not absolve the company or any affiliate for responsibility from hearings going on in response to Irene or any other storm,” Sullivan said.


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