National Grid utility agrees to buy power from Cape Wind; says average bills to go up slightly

Utility agrees to buy power from Cape Wind

BOSTON — The utility National Grid announced Friday that it has agreed to buy electricity from the nation’s first offshore wind farm, planned off the coast of Cape Cod.

Under the 15-year contract, National Grid would pay 20.7 cents per kilowatt hour starting in 2013 for half the power produced by the 130-turbine Cape Wind project in Nantucket Sound.

The price would go up by 3.5 percent annually to keep pace with inflation.

The deal is considered crucial to attract financing for a project estimated to cost at least $2 billion.

The deal must still be approved by state regulators.

Adjusted to today’s dollars, Cape Wind officials say the cost in first year of the deal is 18.7 cents per kilowatt hour compared to the current cost of electricity of about 9 cents per kilowatt hour. The utility, which has 3.3 million customers in Massachusetts, New Hampshire, New York and Rhode Island, said the deal will add about $1.59 to the average customer’s monthly electricity bill in 2013.

National Grid U.S. president Tom King said the country must develop renewable energy, even though it’s currently more expensive.

“This is about taking action to ensure that we have a clean energy economy in the future,” he said. “It’s going to require investment, and it’s going to require that we are willing to take that investment and move it forward as a community.”

Cape Wind president Jim Gordon said, “The question is whether folks are prepared to pay five cents a day for a better energy future.”

Audra Parker of the Alliance to Protect Nantucket Sound, which opposes Cape Wind, noted that the utility’s projected rate hike amounts to about $23 million in the first year when it’s spread over its 1.2 million Massachusetts customers.

“Any way you slice it, it’s expensive power,” Parker said. “I think once … the numbers are analyzed, I do think public and political support (for Cape Wind) will erode.”

Cape Wind, a privately held developer, received final approval last week from Interior Secretary Ken Salazar, who stepped in early this year to bring resolution to a project that was in its ninth year of federal review. He touted Cape Wind as the start of a new clean energy industry in the U.S., which lags decades behind Europe in offshore wind development.

But critics say Cape Wind threatens wildlife and would destroy historic vistas and cultural sites in Nantucket Sound, all to benefit a private developer. Several opponents have vowed to stop the project in the courts.

Gov. Deval Patrick’s administration strongly backed Cape Wind, but cautioned costs must be reasonable. On Friday, Massachusetts Energy and Environmental Secretary Ian Bowles said the proposed deal’s price was “much better than I expected.” He said his analysis, which subtracts a renewable energy credit he said consumers would pay the utility anyway, puts Cape Wind’s power at 12.6 cents per kilowatt hour.

That price is comparable to the price of natural gas at its peak two years ago, he said. Given the trends in natural gas prices, Bowles said he believes the deal will ultimately save Massachusetts ratepayers money over the life of the deal.