The Committee of 100 | FYI Archives

Gary Stockbridge, President of Delmarva Power, met with The Committee of 100 Environment Committee on May 1st. Information from Delmarva Power’s presentation is presented in this FYI. Peter Mandelstam, President of Bluewater Wind, met with the Environment Committee on April 3rd and information from Bluewater Wind’s presentation was presented in the April FYI.

In 1999, the Delaware General Assembly passed the Electric Restructuring Act, which, in deregulating the provision and distribution of electricity, set a 7-year rate freeze. In 2005, the General Assembly established the Renewable Energy Portfolio Standards (RPS) to require that minimum percentages of state electricity energy supply come from renewable resources.

In 2006, as the 7-year rate freeze expired and customers faced a 59% increase in electric bills, the General Assembly passed House Bill 6 (HB 6), the Electric Utility Retail Customer Supply Act of 2006 (EURCSA), amending the Electric Restructuring Act of 1999 “to stabilize electricity pricing and utilization.” HB 6 required that Delmarva Power seek Requests for Proposals (RFP) “for the construction of new generation resources within Delaware” with “selection criteria based on the cost-effectiveness of the project in producing energy price stability, reductions in environmental impact, benefits of adopting new and emerging technology, siting feasibility and terms and conditions concerning the sale of energy output from such facilities.” The Public Service Commission and Energy Office were charged with ensuring that each RFP include “a. proposals that utilize new or innovative baseload technologies, b. proposals that provide long-term environmental benefits to the state, c. proposals that have existing fuel and transmission infrastructure, d. proposals that promote fuel diversity, e. proposals that support or improve reliability, and f. proposals that utilize existing brownfield or industrial sites.”

In 2007, the General Assembly amended the Renewable Energy Portfolio Standards to require 20% by 2019. It also created the Sustainable Energy Utility (SEU) to promote customer-sited renewable energy generation.

As the Bluewater Wind EURCSA proposal (see the April FYI) made its way through the process and was poised for approval in December 2007, Delmarva Power, mindful of the anger of its customers when faced with the 2006 59% rate increase, understood that its customers would again be angry when faced with a new price hike, even if Delmarva Power was not responsible for that increase.

Delmarva Power’s profits come from the transmission of electricity–no matter the cost– rather than from the production of electricity. It believes that its responsibility to its customers is to “identify and negotiate the lowest cost supply of energy, including renewable energy, for its customers; follow the requirements of Delaware’s renewable energy laws and provide renewable energy to its customers; protect the environment by helping [its] customers reduce

their overall energy usage; [and] aggressively represent the interests and concerns of [its] customers before the Delaware Public Service Commission and General Assembly.”

To that end, Delmarva Power concluded that land-based wind would be less costly for its customers than offshore wind, while providing the same environmental advantages. Delmarva Power is

committed to delivering 20% renewable-source energy by 2019, with wind power as a major source of its renewable energy. While it recognizes that “the price of renewable energy is a premium compared to fossil fuels,” its goal is to purchase the least costly renewable energy. Based upon the preliminary bids it has received, Delmarva Power believes that it can provide land-based (onshore) wind power at approximately 50% of the cost of offshore wind power, with a total cost savings to Delmarva Power’s customers of over $50 million per year (over $100 per customer per year) over the Bluewater Wind proposal. It expects to be able to release information on those bids in June.

Delmarva Power points out that the Bluewater Wind proposal contains guaranteed price increases of 2.5% per year for the 25-year contract, a 120% increase over the life of the contract, representing over $1.5 billion dollars. In addition, while land-based wind power is a mature industry in the United States, there are no offshore wind farms in the U.S. There is currently operating capacity close to 17,000 MW from land-based wind farms in the United States, enough to power the equivalent of almost 4.5 million homes; however, there is not even a federal permitting process established to consider permitting an offshore wind farm.

The environmental benefits of wind farms are the same whether onshore or offshore. When either offshore or land-based wind farms produce electricity, PJM, the regional grid operator, reduces electric output from the most expensive source, which, in our region, is usually fossil-fuel power plants. As wind power replaces fossil-fuel power, the environmental benefit is the same from all wind power sources.

The economic benefits of offshore vs. land-based wind farms may be a wash. While Bluewater Wind projects employment for Delawareans, both during construction and maintenance, the University of Delaware’s Ed Ratledge testified that the Bluewater Wind’s proposal could result in a net loss of jobs for Delaware over the 25-year term because the high-cost premium will impact disposable income, “offsetting any promise of jobs and resulting in a net job loss.”

Delmarva Power acknowledges that “there is a future for offshore wind in the United States once the costs become more competitive.” Delmarva Power’s position is that offshore wind “should be piloted in a way that spreads the cost across as many consumers as possible, e.g., the New Jersey process which does not require long-term contracts and spreads the cost across the state. Delmarva Power also calls for Delaware to work with neighboring states for a regional approach to minimize the cost impact on “any one group of customers.”

The Senate Energy and Transit Committee’s Comprehensive Report on Affordable, Environmentally Friendly Energy with a Detailed Analysis of the Proposed Bluewater Power Purchase Agreement (Senate Report) “commends the efforts by the Delaware Public Service Commission (PSC) and all the other parties to pursue innovative solutions like the proposed offshore wind farm” but “concludes that, while wind generation should be a significant component of the State’s electricity supply portfolio, Delaware’s citizens should not assume the large risk or pay the exceptionally large premium associated with the offshore wind farm proposed by BWW” (Bluewater Wind).