Kenneth FletcherRanking House Republican Utilities and Energy CommitteeHouse District 54 August 6, 2010 Public Utilities Commission Docket No. 2010-235 Request for Comments: Long Term Contracting for Offshore Wind Energy and Tidal Energy Projects I want to offer my comments relative to the Commission’s inquiry concerning the interpretation of the rate impact limitation provision included in the LD 1810 (P.L. 2009, chapter 615). As a preface to my input, it is important to recognize the policy direction that was considered in the enactment of the ‘Ocean Wind’ legislation. While there was a consensus the commercialization of ‘Ocean Wind’ may well be a unique opportunity for the Maine people, it was understood that there could be significant upfront costs associated with attracting a commercial deep-water over the horizon wind (DWOHW) project. While it was not expected that the first phase of DWOHW would be able to compete on a pure price basis, the intent was to make the ‘investment’ based on the total economic return approach that would be realized from the ancillary benefits. Those included the economic development and the associated employment opportunities for Maine people thereby justifying the higher than market long term contract price. An additional consideration was the understanding that the focus of the DWOHW initiative was the based on the displacement of fossil fuel for home heating and transportation. It is significant the DWOHW initiative recognized that the DWOHW technology would not be competitive and sustainable in relation to the existing traditional electricity generation sources in the short and intermediate time frames. When one considers that Maine electricity ratepayers pay 59% higher rates than the national average ($42.77/million BTU in 2007 as compared to the US average of $26.84/million BTU…MDF-Measures of Growth in Focus 2010), there was a concern that any additional burden on Maine ratepayers needs to considered on a comprehensive basis to ensure that the cost and benefit analysis clearly shows that any above market long term contracts cost can be justified. The System Benefit Charge (SBC) was established as a “cap” to mitigate and limit the ratepayer exposure. There was a clear intent to use the SBC foundation as the framework due to the ability to quantify the financial upper limit as well as recognize the ultimate consumers and beneficiaries of a DWOHW project (i.e. home heating and transportation). As was previously established by Legislative action through the Regional Green House Gas Initiative (RGGI), transmission and sub-transmission customers would be excluded from the SBC assessment due to the unique nature and circumstances of their respective operations. It was not by chance or oversight that LD 1810 specifically excluded transmission and sub-transmission (i.e. industrial class customers) from the DWOHW long term provisions. As the Utilities and Energy Committee modified the provisions of LD 1810, I submitted the amendment that specified that the potential above market costs associated with long term contracts for DWOHW would be based on those customers who were subject to the SBC assessment. In addition, the above market cost cap was to be limited to the SBC assessment at the time the “contract is enter’ since this would be a known amount. As enacted, the Commission shall conduct a competitive solicitation for proposals for long term contracts by September 1, 2010. Recognizing that the current SBC assessment is at 0.145 cent/kWh, the intent was to limit the above market cost exposure to approximately $13 million per year. Since the Legislature would need to authorize any changes to the SBC assessment, the implications of those charges on the above market cost long term cost cap could be considered as part of that process. From a practical sense, if the justification for an above market rate for a DWOHW long term market contract is to make the ‘investment’ for home heating and transportation transformation, the industrial class would not be direct customers or beneficiaries. Secondly, the industrial class already utilizes the competitive field for selecting their electricity suppliers as opposed to the Standard Offer. Therefore, a commercialized DWOHW would have minor if any direct benefit to this customer class. In recognition of the intent to mitigate the above market costs on electric rates, the enacted version of LD 1810 contained specific provisions that would be required which included the development of an Ocean Wind Green Power offer so that customers could select the DWOHW electric source which would be at an above market rate. The intent was to provide the opportunity for public and private entities to ‘lead by example’ and support the development of DWOHW while minimizing the cost shifting to other customers. Thank you for the opportunity to submit comments relative to the Commission inquiry. Kenneth FletcherRanking House Republican Utilities and Energy CommitteeHouse District 54