BOSTON – The nation’s first offshore wind farm enjoys high-profile federal and state backing, but it hasn’t been able to win over one important party: the second-largest utility in Massachusetts.
Cape Wind sorely needs to attract big power customers to obtain the financing to fully build out its 130-turbine project in Nantucket Sound. But the utility NStar has taken a tepid stance on Cape Wind. Chief executive Tom May once proclaimed his company “agnostic” about it.
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It may be about to get religion.
A pending merger between NStar and Northeast Utilities has become a possible pressure point to get NStar to buy Cape Wind power.
Since the merger was announced last year, regulators added a requirement that such deals must advance the state’s clean energy goals, which include developing offshore wind. The state also made a request, still pending, to stay proceedings for a review of the merger’s effect on rates — a lengthy process that could lead to a merger-killing delay.
The moves are obvious attempts to pressure NStar to buy power from a favored private developer, said Republican state Rep. Brad Jones, minority leader in the Massachusetts House.
“(It’s) the great administration shakedown of NStar,” he said.
In The Wall Street Journal, environmental attorney Robert F. Kennedy Jr. accused Gov. Deval Patrick’s administration of “trying to hold hostage the proposed NStar-Northeast Utilities merger unless the two electric companies agree to buy Cape Wind’s power.”
But the state says it’s just upholding the law and protecting the public interest. Asked if the filings were related to Cape Wind, Department of Energy Resources commissioner Mark Sylvia said, “No.”
The state is now in discussions with NStar about the utility buying Cape Wind’s power, Sylvia said. He said a purchase would be “a welcome step,” because Cape Wind helps meet various state clean energy goals, including installing 2,000 megawatts of wind energy by 2020, Sylvia said.
Asked if a purchase would affect the state’s decision to pursue the merger stay, he said: “We’d drop our motion to stay, ultimately, if NStar could demonstrate how the proposed merger would result in a net benefit to ratepayers and the commonwealth’s clean energy goals.”
NStar declined to comment.
Cape Wind represents the nation’s first major step in turning its offshore breezes into energy. Last year, U.S. Interior Secretary Ken Salazar approved the project after nine years of grinding federal review, hailing it as “a new direction in our nation’s energy future.”
It soon had its first customer in National Grid, the state’s largest utility, which agreed to buy half of Cape Wind’s power for an average of about 24 cents per kilowatt hour over 15 years. Its deal met a state requirement that utilities enter long-term contracts to buy 3 percent of their electricity from renewable sources, but critics said it was too expensive for electricity customers.
No other state utility has since signed on, and NStar is the only one large enough to buy a significant chunk of Cape Wind’s output.
Without committed buyers for all its power, Cape Wind is unlikely to find financing for the full $2.6 billion project, which it plans to begin operating in 2013.
It could try to move a smaller project forward. But if Cape Wind builds 110 turbines or fewer, National Grid must pay more for the power, according to its contract.
Cape Wind has argued, and state regulators have agreed, that focusing narrowly on price overlooks the project’s unique benefits, such as the jobs it will spur and close proximity to an area thirsty for electricity.
But NStar has so far pursued cheaper power, filling about half its state requirement with three contracts from land wind farms at less than half the price National Grid would pay Cape Wind. NStar chose from dozens of bidders, indicating it could bypass Cape Wind and still fill its entire renewable energy requirement.
As the drama plays out, some of those involved wonder how much the public will be served.
While signing on with Cape Wind “would be any easy way to appease regulators,” said Travis Miller, associate director at Morningstar Inc. equity research, “it does nothing to benefit customers, which is supposed to be the regulators’ key criteria.”
And Andrew Tarsy, president of the pro-Cape Wind Progressive Business Leaders Network, said it’s debatable just how much governments should push private projects, but it’s done at different levels all the time, and the public can benefit.
“One person’s interference is another person’s public policy,” Tarsy said.
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