United States

United States

Dodging a death blow in Delaware

After being dealt a near death blow by state regulators, the Delaware offshore wind bid by Bluewater Wind has been granted a second chance. This month, four state agencies are to rule whether or not to force the state's largest electric utility, Delmarva Power, to agree a power purchase agreement (PPA) with Bluewater, which is now owned by Australian investment fund manager Babcock & Brown. Agreement on a PPA is seen as the only way the project will move forward.

The 300 MW proposal was nearly derailed a little over a month ago after the state's Public Service Commission (PSC) said it was too expensive and not in the interest of state consumers. This followed what experts called a blunder on the developer's part: Bluewater included mathematical "worst case" scenario price escalators on price rises of steel, aluminium, copper and other essentials for the wind plant in its mid-September price bid on the contract.

The escalators could have increased the average Delmarva consumer electric bill in Delaware by $55 a month. Company attorney Tom McGonigle says Bluewater has resubmitted its bid without the escalators, which should bring monthly increases on electric bills to between $6.76 and $8.92 for the average Delmarva customer. If the worst-case scenarios of commodity price increases came true, Bluewater is now willing to take that risk rather than pass it on to the utility.

In retrospect, Bluewater's decision to put the escalators in their earlier bid was a mistake, says Professor Willett Kempton at the University of Delaware. But politics may be at play, he says, referring to an unproven but stated claim by Bluewater that the developer was misled by the utility into adding the escalators. "The claim is that they were led to do that and some other things that raised the price, like shrinking the project in order to be discounted as being too expensive," says Kempton "So whether it was a blunder or they were led to do something that was then held against them, I cannot say. But it did cause a problem with acceptance of their bid."

By most accounts, Delmarva is not a willing participant in the PPA negotiations and is only going through the motions because a recent state law requires it to secure a long term, environmentally responsible power contract (Windpower Monthly, October, 2007) and state regulators chose the offshore wind plant over two fossil fuel projects to be the subject of further contract negotiations.

Following Bluewater's revised bid without the escalators, the PSC and three other state agencies set a deadline of December 10 for the utility to agree to a PPA with Bluewater. Depending on that outcome, the agencies will decide on December 18 whether or not to back a PPA between the companies.

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