Baker reverses course on utility contracting
One of the most bizarre contracting arrangements in state government may soon be coming to an end.
In 2016, the Legislature passed and Gov. Charlie Baker signed a law containing a provision putting the state’s three private utilities in charge of negotiating contracts for clean electricity on behalf of the state. Eversource, National Grid, and Unitil were given the authority to pick the clean energy supplier; only if the three companies couldn’t agree could state regulators step in and take action.
Baker on Wednesday said he was filing legislation to change the way the state procures offshore wind contracts, including transferring the authority to select the winning bidder from the utilities to the Department of Energy Resources.
The initial decision to put the utilities in charge was strange for several reasons. First, it put private companies in charge of very public decisions about power contracts costing ratepayers billions of dollars. Second, the utilities were compensated handsomely, getting paid 2.75 percent of the contract’s value, even though their risk was minimal. Finally, the utilities evaluating clean power contract bids often found themselves sitting across the bargaining table from themselves, since in many cases separate arms of the utilities were partnering with the companies submitting bids.
“At the end of the day, I’m being graded by my competitors,” he said. “I can’t help but be concerned. It’s not the best place to be in a competitive process.”
Dan Dolan, the president of the New England Power Generators Association, felt similarly. “It’s hard to claim that a company that writes the RFP, bids on the [request for formal proposals], and decides who wins the RFP is unbiased,” he said.
TDI ultimately lost out to a project affiliated with Eversource, which ultimately fell by the wayside when it couldn’t get a key permit for a power line from the state of New Hampshire. The deal then was handed off to Central Maine Power, which is still trying to nail down its final approvals for a power line running through Maine.
What made the arrangement with the state’s utilities most unusual was that it put utility executives – not elected officials – in charge of setting state policy. Most people knew state law put the utilities in charge of selecting clean energy contract winners, but they assumed the Baker administration was really calling the shots behind the scenes.
The Baker administration did little to dissuade that assumption. When Mayflower Wind won its contract in 2019, Baker administration officials made the announcement and briefed reporters. The officials declined to say why Mayflower Wind’s lowest-price offer was selected instead of others put forward by the company that offered slightly higher prices but came with more onshore investment.
Yet when news stories appeared suggesting the Baker administration had made the contracting decision, state officials demanded corrections, insisting it was utility executives, and not them, who had selected Mayflower Wind’s lowest-priced offer.
Rep. Patricia Haddad of Somerset said at the time that it was starting to dawn on lawmakers that it was a mistake to put the state’s utilities in charge of the procurement process. She and many others on the South Coast had written letters to the Baker administration imploring officials to take onshore investment seriously, but with the Mayflower Wind procurement she learned the Baker administration wasn’t making the decision, the utilities were.
A copy of Baker’s legislation was not immediately available.
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Offshore wind shift: Gov. Charlie Baker signaled a major shift in his thinking on offshore wind, filing legislation that would have the state and its electricity ratepayers spend more to try to land the onshore economic development accompanying the emerging offshore wind industry. Baker’s bill calls for spending $750 million of federal aid on clean energy infrastructure and doing away with a price cap on power contracts that many believe has hindered onshore investments.
— Baker’s shift brings him in line with current thinking in the House, but may put him at odds with Senate leaders wary of removing the emphasis on purchasing offshore wind power at the lowest possible price. Sen. Michael Barrett of Lexington said state ratepayers already pay some of the highest rates in the nation. “Because of the climate crisis, we need to go all-electric with respect to both our cars and our heating systems, which means we need to boost our overall consumption of electricity in the teeth of our high per-unit costs. It’s a dicey time to bring up abolishing price constraints,” he said.
Alzheimer’s drug fallout: The Food and Drug Administration’s approval of a questionable Alzheimer drug developed by Biogen spurs boycotts by hospitals and insurers and calls for regulatory reform from those who say the drug-approval processes at the FDA and Medicare need overhauls. Read more.
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