Windfarm agreement is good for both companies

www.capegazette.com/
Fri, Jul 4, 2008

For months it appeared that the wind had dropped out of the sails of what would be the nation's first offshore wind farm. But after months of intense negotiations, Delmarva Power and Bluewater Wind have hammered out a deal, and last week they signed the first contract in the nation between an offshore wind energy company and a power provider. The fate of the project appeared to hang in limbo after representatives of four state agencies tabled a vote on the original contract last December. Environmentalists and state officials lobbied for the project during the intervening months.

Then, Sen. Anthony DeLuca, D-Varlano, asked Delmarva Power President Gary Stockbridge and Hunter Armistead, head of the energy division of Babcock and Brown, Bluewater Wind's parent company, to talk. Just talk.

And it paid off. After two months of negotiations the two companies announced they had reached a deal. The state made a key contribution to the deal by changing renewable energy portfolio requirements, giving producers 3.5 renewable energy credits for every megawatt of energy produced. That means Delmarva Power will have to purchase fewer credits to meet state renewable requirements and Bluewater Wind will have more credits to sell on the market to other potential customers, generating more revenue.

Stockbridge said the renewable energy credit changes will give his company's ratepayers up to $100 million back over the course of the 25-year contract. Under the new contract, Delmarva Power will purchase half the power it would have under the original contract, but because of changes made by the Legislature to the renewable energy credits program, Bluewater Wind can sell power to Delmarva Power at the same price it offered originally, when the project was going to be larger. Bluewater Wind has the flexibility to expand the project to produce up to 600 megawatts of power. Combined with the renewable energy credits changes, Bluewater Wind has a financially viable project.

Bluewater Wind spokesman Jim Lanard said the renewable energy credits changes will enable Bluewater Wind to offer the same price as in the initial agreement, but the project will be smaller. Stockbridge said the deal is one both sides are comfortable with. He credited DeLuca with keeping the negotiations intact. "Senator DeLuca was not telling either side what to do. He reminded us we want to do what is best for Delaware and for our customers," Stockbridge said.

Armistead said this deal is better than the last because, unlike the original contract, both parties support it and are willing to go forward and make it work. Armistead and Stockbridge both praised DeLuca at their joint press conference announcing the deal. They said being able to work one-on-one and form a personal relationship helped the deal.

That's a change from last year when there were allegations parties were not negotiating in good faith. Although an arbitrator charged by the Public Service Commission with overseeing the process said such claims were untrue, the charges remained that Delmarva Power was trying to kill the deal. Lanard said, of last year's talks, "In the negotiating room, the tone was always professional and cordial. I thought we got along fine, but there were different points of view." Lanard said a lot of the tension in negotiations had to do with the deadlines negotiators needed to meet so the Public Service Commission and representatives of three other state agencies could review the contract.

This last, successful round of negotiations was held outside the realm of the state agencies, which will meet Tuesday, July 8, to begin to consider this contract. Changes to the structure of the contract benefited Delmarva Power, while keeping the project viable for Bluewater Wind. Armistead said going into these negotiations, "I was hopeful but not overly optimistic, because of how things had developed until then." He said he and Stockbridge got on well and once each company's concerns were out on the table, the talks opened up and became productive. "The last part of the process was enjoyable. It paid off that we dug in our heels," Stockbridge said.

Stockbridge said his company's concerns about fairness and cost have been addressed in this deal. With a non bypassable surcharge the cost of buying offshore wind, which Stockbridge said he still considers expensive, will be spread across all Delmarva Power customers instead of only standard-offer-service customers. Lanard said from the issuance of the request for proposals, Delmarva Power consistently said it wanted to purchase a smaller amount of power than Bluewater Wind felt was necessary to finance the project.

Lanard said, "Delmarva Power worked hard to protect its ratepayers' interests and Bluewater Wind did the same. We had to make sure we had a project that could be financed and built." He also gave credit to DeLuca for restarting the negotiations and to Lt. Gov. John Carney. Carney secured a commitment from Babcock and Brown to make Delaware the regional economic hub of its operations and for a grant to Delaware Technical & Community College for a program to train wind turbine technicians.