Utilities terminate Cape Wind power contracts

Utilities terminate Cape Wind power contracts

Could be crippling blow to wind farm, New Bedford

CAPE WIND FACED a potentially crippling blow Tuesday night as the state’s two largest utilities announced they were terminating their contracts to purchase roughly three-quarters of the power output of the proposed wind farm in Nantucket Sound because of the project’s failure to meet two critical deadlines.

NStar officials said the project had failed to complete financing for the wind farm and begin construction by the end of 2014, as required by the power purchase contract. Cape Wind could have extended the deadlines for two additional six-month periods by paying a deposit of nearly $1.3 million, but chose not to do that. Without the power contracts, it is unlikely Cape Wind would be able to finance and build the 130-turbine project that sought to become America’s first offshore wind farm.

The terminations could also have a profound impact on the state and New Bedford. Gov. Deval Patrick, perhaps Cape Wind’s biggest champion, has poured more than $100 million into New Bedford for a facility to service offshore wind companies. Cape Wind was expected to be the first of many customers, but if the Nantucket Sound wind farm never gets built it could be a devastating blow for the city.

The contract dispute may end up in court, as Cape Wind spokesman Mark Rodgers said the NStar and National Grid contract terminations are not valid. Rodgers said Cape Wind President James Gordon had already exercised so-called force majeure clauses in the contracts, effectively suspending the deadlines because of events beyond the wind farm’s control, specifically a wave of lawsuits brought by opponents of the project.

Gordon, in letters to the two utilities on Dec. 31, said litigation against the project over the years mounted by the Alliance to Protect Nantucket Sound is “extraordinarily unusual, unexpected, and significant. It has been completely beyond Cape Wind’s control and could not have been prevented or avoided.”

NStar and National Grid officials apparently disagree, and went ahead and terminated the contracts, which called for purchasing electricity from Cape Wind at a starting price of 20 cents a kilowatt hour and rising over time.

“The deadlines Cape Wind has missed were contractually agreed-upon by both companies,” said NStar spokeswoman Caroline Pretyman in a statement. “Contracts such as the one between us and Cape Wind have these milestones so that projects that are unable to move forward do not burden customers for long periods of time in a high-priced market environment due to lack of supply. We remain committed to meeting the Commonwealth’s clean energy goals through competitively bid contracts while also keeping prices down on behalf of our customers. “

NStar, a subsidiary of Northeast Utilities, has long had bad blood with Cape Wind. Northeast officials, led by chief executive Tom May, feel Cape Wind’s electricity prices are too high. May agreed to buy 27.5 percent of the power output of the project in 2012 to win the Patrick administration’s support for NStar’s merger with Northeast Utilities.

National Grid was an enthusiastic supporter of its Cape Wind contract initially, agreeing to purchase 50 percent of the project’s power output. But perhaps National Grid soured on the project after the lengthy delays and the missed financing deadline, which CommonWealth reported on in mid-December. National Grid officials could not be reached for comment Tuesday night, but Rodgers of Cape Wind confirmed the utility company had also sent a letter to Cape Wind terminating its power purchase contract.

The US Energy Information Administration says offshore wind is currently one of the most expensive technologies for producing electricity in the country at an average price of 20.4 cents a kilowatt hour, far more than solar (13 cents), onshore wind (8 cents), and natural gas (6.6 cents).

The Alliance to Protect Nantucket Sound’s chief funder is Bill Koch, the flamboyant Florida businessman who didn’t want to look at the wind turbines from his Osterville vacation home. Audra Parker, the executive director of the Alliance, said Cape Wind’s lease and its power contracts are its two main assets. Without the power contracts, Parker said, it will be very difficult for Cape Wind to ever begin construction.

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Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

“This is a fatal or near-fatal blow,” Parker said. “I think it’s very bad news for Cape Wind. Of course, it’s good news for Massachusetts ratepayers.”

Gov. Patrick had a different view. In a statement issued late Tuesday night, he said “the future of offshore wind in the Commonwealth remains bright, as does the path for the marine commerce terminal in New Bedford.”