Gordon defends Cape Wind

It’s taken 10 years, but Jim Gordon, the president of Cape Wind, says the 130-turbine offshore wind project is about to clear its final regulatory hurdle.

A supremely confident Gordon tells me the contract his company signed with National Grid to buy half of the project’s power output will be approved by state regulators in November. Although no other customers have stepped forward yet, Gordon predicts the approval of the National Grid contract will prompt other utilities to buy the project’s remaining power, allowing construction of the nation’s first offshore wind farm to finally begin.

His confidence is not shaken by rising concern about the cost of the Cape Wind power contract. At a recent gubernatorial debate sponsored by MassINC and Suffolk University, Republican Charles Baker, independent Tim Cahill, and even Green-Rainbow Party candidate Jill Stein all said the contract was too expensive and should be scrapped. Stein likened the Cape Wind contract to the Big Dig, calling it Big Wind. Baker called the Cape Wind deal with National Grid a “no-bid contract” and “a sweetheart deal.”

Gordon bristles at the comments. “The accusation that Cape Wind is a no-bid, backroom deal is totally false,” he said.

Power distribution companies like National Grid often buy electricity that they in turn sell to customers who haven’t chosen their own power supplier. Those power purchases are typically made through a bid process. By contrast, the Cape Wind contract was negotiated, not put out to bid. But that type of arrangement is allowed under the state’s Green Communities Act, which was passed to promote the development of renewable energy sources.

Indeed, Cape Wind and National Grid obtained approval from the state Department of Public Utilities to enter into contract negotiations in December. By May, the parties had agreed to a contract that called for National Grid customers to pay 20.7 cents per kilowatt hour starting in 2013, rising 3.5 percent a year over the course of the 15-year contract.

Midway through the subsequent DPU review process, Attorney General Martha Coakley came out in support of the contract after Cape Wind agreed to slash the initial price by 10 percent, to 18.7 cents. Gordon says the price reduction was not evidence that the original contract was padded.

“It was painful,” he said. “We made a political calculation that it was important for us to get the chief ratepayer advocate in the Commonwealth to support the project and the contract,” he said.

Gordon also points out that the Cape Wind contract is nothing like the Big Dig. When the cost of the Big Dig escalated, taxpayers were on the hook for the higher pricetag. If the cost of building Cape Wind escalates, Gordon and his financial backers will have to pay. “Any cost overruns are on us,” he says.

Electricity is currently selling for 6 to 9 cents per kilowatt hour, but Gordon says Cape Wind’s 18.7-cent price is reasonable since it includes electricity and the cost of delivering that energy to the power grid, as well as renewable energy credits that could be worth as much as 6 cents per kilowatt hour. If the nation passes climate change legislation and imposes a cost on carbon, Gordon says, Cape Wind’s clean power could take on additional value, which would accrue to ratepayers.

Meet the Author

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.

Gordon says the price of Cape Wind power should not be compared to the price of power generated by fossil fuels – what he calls “brown power” — but instead to other forms of renewable energy. He also says Cape Wind’s ability to deliver electricity reliably during periods of peak demand and its potential to kickstart an offshore wind industry in southeastern Massachusetts and Rhode Island makes it a smart investment and a good hedge against price spikes in fossil fuels.

“Surely Mr. Cahill would not put all of our money in one or two stocks,” he said of the state treasurer. “The electricity portfolio is no different. We need a mix of technologies and a mix of contract lengths. The more diversity we have the less risk we have.

True enough, but stocks can be sold if the investment climate changes, with the proceeds used to purchase new investments. By contrast, Cape Wind represents a 15-year commitment for the ratepayers of National Grid. Any above-market cost of the power will show up in the distribution charge on customer bills, even those who buy their electricity from another supplier.