A HOUSE COMMITTEE released a long-awaited energy bill on Monday that calls for the state’s utilities to negotiate long-term contracts for large amounts of offshore wind and Canadian hydroelectricity, although the hydroelectric portion of the proposal is half the size Gov. Charlie Baker had sought.
The bill, dubbed “an act to promote energy diversity,” calls for the procurement of a total of 1,200 megawatts of offshore wind capacity by the middle of 2027. The first 15- to 20-year contract for 400 megawatts would go out no later than June 30, 2017, and would be restricted to developers operating on the outer continental shelf in two areas designated in 2012 by the US Department of the Interior. Cape Wind officials confirmed the wording of the bill would prevent them from competing for the contracts.
The bill also calls for the state’s utilities to negotiate contracts for Canadian hydroelectricity or Canadian hydroelectricity in tandem with onshore wind or other clean energy projects starting on Jan. 1, 2017. The bill calls for the delivery of no more than 9.45 million megawatt-hours of power, roughly 1,200 megawatts, in contracts lasting 15 to 20 years.
Baker’s hydro legislation called for the delivery of twice that amount and his administration has said the hydroelectricity is needed if the state is to meet its 2020 emissions targets.
The proposed legislation uses different terms in describing how much power under both options would be purchased. The legislation calls for purchasing 1,200 megawatts of offshore wind nameplate capacity, meaning the wind farms would be capable of generating 1,200 megawatts at maximum output. In reality, given the vagaries of the wind, the actual output would probably be less than half that amount. For hydroelectricity, however, the legislation calls for purchasing a firm 1,200 megawatts of power.
For both procurements, the legislation requires a competitive bidding process and mandates the execution of contracts. But both bidding processes also require the approval of the state Department of Public Utilities. “DPU may terminate solicitations if it determines no reasonable proposals were received,” said a bill summary issued by the Legislature’s Committee on Telecommunications, Utilities, and Energy.
What is “reasonable” in terms of cost is a bit murky in the bill. The bill requires that the proposals must provide enhanced electricity reliability, reduce winter electricity price spikes, “provide reliability, price, economic, and environmental benefits that outweigh any costs to ratepayers,” and create additional employment in the state. In the case of hydroelectricity, the bill says “proposals that combine more than one source of clean energy generation” would be preferred.
The legislation also calls for the utilities, the Department of Energy Resources, and Attorney General Maura Healey to select an “independent evaluator” to assist the Department of Public Utilities in monitoring the contracting process. An independent evaluator could be helpful as the utilities National Grid and Eversource Energy may end up negotiating contracts with entities with whom they have corporate ties.
Two definitions contained in the legislation would limit competitors for the offshore wind contracts to the three companies that have secured long-term leases on the outer continental shelf — Dong Energy, which is owned by the Danish government; Deepwater Wind; and Offshore MW, which is owned by the Blackstone Group. The wording of the bill would exclude Cape Wind, which has a long-term federal lease for a wind farm in Nantucket Sound but comes with political baggage because of its long legal battles with landowners on the Cape.
Jim Gordon, the developer behind Cape Wind, said the wording of the bill effectively discourages competition. Officials from the other wind companies say Cape Wind is licensed for wind turbine technology that would make it uncompetitive in a head-to-head bidding war with firms that can utilize bigger and more more efficient turbines. Gordon disagrees, and says the market should decide who should land the offshore wind contracts.
“If they’re right, then they’ll win the bid,” Gordon said. “If we’re right, then we’ll win the bid. All we want to do is fairly compete on a level playing field.”
Rep. Thomas Golden of Lowell, the House chairman of the Legislature’s Telecommunications, Utilities, and Energy Committee, said members of the panel decided to focus just on those companies that have secured leases in federal waters under a competitive process. “We’re trying to make this as competitive as possible,” he said, declining to say why Cape Wind’s involvement would reduce competition. “At this point, the federal piece is our best foot forward.”
Baker, after a State House meeting with House Speaker Robert DeLeo and Senate President Stanley Rosenberg, said he had not read the House bill yet and had no comment on the Cape Wind exclusion. In general, he said, the House bill appeared to be “very strong.”
DeLeo said he liked the bill’s emphasis on energy diversity and sustainability. “The emphasis on wind and hydro is the right way to go,” he said.
The House legislation has no provisions dealing with natural gas pipelines or solar energy. There had been talk that the House might include legislation authorizing electric utility ratepayers to finance the cost of new natural gas pipeline construction, but that type of provision was not included in the bill. The legality of such an approach is currently being challenged before the Supreme Judicial Court. The Kinder Morgan natural gas pipeline proposal, which earlier had been suspended, was officially canceled on Tuesday.
Dan Dolan, president of the New England Power Generators Association, which represents existing power-generating companies, said the House energy legislation was disappointing. “The proposal would carve up one-third of the Massachusetts electricity marketplace into decades-long contracts that have the potential to dramatically increase electricity costs for consumers,” he said in a statement. “This is occurring at the very moment consumers are realizing lower electricity rates thanks to fierce competition in the wholesale market with billions of dollars of new plants being developed here in Massachusetts.”
George Bachrach, the president of the Environmental League of Massachusetts, said the bill is too timid. He called for 2,000 megawatts of offshore wind capacity. He also said the Legislature should revisit the cap on solar energy it passed just a month ago. “We are already hitting the net metering cap in the National Grid territory,” he said in a statement.
The House-crafted bill will first go to the House Ways and Means Committee and then on to the full House. Whatever bill emerges from the House would then go to the Senate for action and ultimately to the governor for his approval.