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HISTORY OF DELAWARE OFFSHORE WIND POWER FARM: Compiled for the League of Women Voters of Delaware Lisa Pertzoff May 2006: The impact of electricity deregulation in early 2006 produced sudden large increases in residential electric bills, causing a public outcry. In response, the Delaware Legislature passed House Bill 6, the Electric Utility Retail Customer Supply Act (EURCSA). The bill mandated the development of a long-range plan to deal with electricity supply and demand in Delaware called an Integrated Resources Plan (IRP). In addition, Delmarva Power was directed to issue a competitive Request for Proposals (RFP) for a long-term Power Purchase Agreement (PPA), a 10–25 year contract for new power generation within the State containing criteria based on cost effectiveness as measured by price stability, reductions in environmental impact, benefits of new and emerging technology, and several other factors. Late fall 2006: Three bidders responded to the RFP: NRG proposed a coal gasification plant at its Indian River location; Conectiv Energy and Supply, Inc. (CESI) submitted a bid for traditional gas fueled power; and Bluewater Wind’s (BWW) bid was for an offshore wind farm. The LWVDE became involved when examination of the RFP, released in October 2007, revealed scoring criteria (evaluation points) favoring bidders utilizing fossil fuels rather than renewable sources such as wind. December 2006: The League submitted written testimony to the Public Service Commission (PSC), expressing its concerns publicly for the first time. These centered around the bid scoring criteria, the true cost of burning fossil fuels, and the long range impact on climate change of emitting CO2 into the atmosphere. March - April 2007: The situation had been gathering public momentum for several months and was by now a high profile issue, attracting the attention not just of the press and elected officials, but also of large numbers of private citizens, other public policy makers, and conservation agencies throughout the State. These entities were expressing virtually unanimous support for offshore wind power. The exceptions were CESI, NRG, and some labor unions. Delmarva Power submitted its draft IRP to the PSC, objecting to negotiating a long-term power purchase agreement, instead proposing continuation of its current policy of using short-term rolling three-year contracts. Its arguments were based on what it claimed would be increased costs of the alternative as well their belief that no new power generation within the State’s borders is necessary. This turned out to one of a number of objections which, when taken together, created an impression that Delmarva was disinclined to embark on any course other than business-as-usual. The League responded to the PSC’s call for public hearings by submitting testimony reinforcing its concerns that Delmarva had not complied with the intent of the law, and that the argument for the use of short-term contracts was flawed in several respects. The Independent Consultant (IC), hired by Delmarva to evaluate the three bids, released its recommendations, awarding the greatest number of evaluation points to CESI for a gas-fueled plant. The LWV again submitted testimony to the PSC, expressing disappointment at the lack of clarity and transparency of the process, and forcefully reiterating its concerns by stating that it 1 opposes any new power generation that emits CO2 or other harmful emissions, while supporting conservation, efficiency, price stabilization, and the timely transition to renewable resources. Delmarva Power evaluated the three proposals and, in accordance with the IC’s report, recommended the CESI proposal. This reinforced the impression that Delmarva had adopted a different interpretation of EURCSA than many others, and that the RFP’s and proposals had been designed and evaluated accordingly. They repeated their position that there is no need for any new large-scale, in-state power generation, claiming its current system will be sufficient when combined with increased energy conservation and efficiency. The League testified once more, pointing out what it considered to be fundamental flaws in the approach and reasoning behind the recommendations, reiterating its previous testimony and warning that although energy conservation and efficiency are necessary components, they are by themselves unlikely to fill the State’s future electricity needs. May – June 2007: The PSC recommended that the bid be awarded to Bluewater Wind. In order to secure the required unanimous vote of the controlling agencies,* a compromise was reached by scaling back the project and adding a provision directing Delmarva to negotiate with all three bidders for additional, small-scale gas-fired power to act as a backup. The parties were given 60 days to negotiate, with a requirement that weekly updates be files weekly to the PSC. Delmarva announced publicly that it would refuse to negotiate. Although it subsequently modified this stance by agreeing, albeit reluctantly, to continue participating, it nevertheless filed a petition for rehearing with the PSC, asking that the order be reconsidered. Along with a large number of others, the League submitted testimony against the petition, which was denied. July – August 2007: Delmarva filed suit in court to have the PSC’s order reversed. It later postponed this action until mid-September 2007, pending the outcome of the backup power negotiations. At a hearing in early August, the public was made aware for the first time of the status of these negotiations, although detailed information was not available. The parties asked for and received an extension of the 60-day deadline, pushing it forward to September. All parties stated they are satisfied with the progress made so far and expected to present their conclusions in mid-September. Mid-September 2007: Delmarva released the so-called “term sheets,” or business proposals, of all three bidders, Bluewater Wind for its scaled-back wind farm, and NRG and Conectiv competing for a smaller, gas-fired backup plant in Sussex County. This was the first time the public had any access to specific cost information concerning the three bids. Delmarva again reacted negatively, claiming that the proposed wind farm exposed customers to unacceptable costs and risks. It took issue with the fact that BWW’s term sheet contained higher costs than the original; however, it is worth noting that Delmarva’s persistent objections contributed heavily to the final decision requiring BWW to reduce its proposed project size by 25%, thereby reducing economy-of-scale benefits. 2 Furthermore, in spite of repeated requests by BWW, Delmarva refused to release its per-kilowatt hour pricing structure, making it impossible for BWW to construct a direct cost comparison. Throughout the period, Delmarva went to great lengths to emphasize that the term sheets in no way constitute an agreement or contract; indeed there was widespread speculation that it was merely continuing to establish a basis for renewing its lawsuit, currently on hold until a final decision is made. About the same time the term sheets were released Delmarva launched a survey to determine if customers favor wind-powered electricity, and, if so, the extent to which they are willing to pay for it. This survey is restricted to Delmarva customers, apparently in response to the company’s reservations about the results of a recently published large, randomized University of Delaware study surveying the State population in general. This study showed overwhelming support for wind power even if it were to cost more. OCTOBER – NOVEMBER 2007: On October 29, 2007, the PSC issued its report on the three term sheets, finding BWW’s proposal unacceptable due to increased costs and other factors. This produced a huge outcry from environmentalists, advocates, and the public in general. The PSC received more than 2,000 letters in one day, almost all of which were in favor of the offshore wind proposal. Once again, the LWVDE submitted written testimony expressing disappointment over the conclusions of the report as well as the process whereby those conclusions were reached. The PSC held a public hearing on the matter on November 20, 2007. BWW further modified its pricing structure in order to address some of the concerns expressed in the PSC October 29 staff report. Public testimony was extensive, including a powerful presentation by former Governor Russell Peterson in favor of the offshore wind proposal. The League briefly summarized its written testimony in an oral statement. In response, the PSC issued an order on December 4, 2007, based on its staff’s updated procedural recommendations, calling for further negotiations between Delmarva Power and BWW, arbitrated by Dr. Lawrence Hamermesh of Widener School of Law, and limited to the long-term contract for wind power, leaving discussion of back up power for a later date. All parties were instructed to develop a standard method of comparing pricing structures. A revised timetable was ordered, calling for a final decision to be made on December 18, 2007. DECEMBER 2007: At the PSC hearing on December 18, 2007, to the astonishment and outrage of many onlookers, including representatives of the LWV, the PSC tabled the entire matter. It is not possible to know exactly why, since PSC members cannot discuss it, but it was widely speculated that a few members of the General Assembly who had strong objections to the offshore wind proposal instructed the Controller General to vote against it. Since a unanimous vote is required of the four decision-making agencies empowered by the statute, this would have resulted in effectively ending the current effort to obtain offshore wind power energy in Delaware. Thus, tabling the measure was the only way to keep it alive. 1/15/2008
The committee report in the OP is one of two measures scheduled for a vote. The other one is a measure directing approval of the wind farm. Surveys by the University of Delaware show 92% of the Delaware public support the offshore wind farm. If it gets shot down in an open vote in the legislature there is going to be a significant backlash.
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