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Following an eight-month proceeding, the Massachusetts Department of Public Utilities (DPU) has approved the 15-year power purchase agreement (PPA) between NSTAR Electric Co. and Cape Wind Associates for the Cape Wind project, a 468 MW offshore wind project planned for Nantucket Sound.

The DPU concluded that the benefits of the contract exceeded its costs and that the agreement provides adequate protections for ratepayers. In addition, the DPU said, the contract will assist NSTAR and the commonwealth in complying with the state's renewable energy and greenhouse-gas emissions-reduction requirements, moderating the system peak load demand, enhancing the electric reliability in the state, and creating jobs.

The agreement, which NSTAR and Cape Wind agreed to in February, is for NSTAR to purchase 27.5% of the output of the Cape Wind project. The contract sets the base price (for electricity, capacity and renewable energy attributes) at $0.187/kWh for 2013, rising 3.5% annually.

The contract allows for upward and downward price adjustments based on a variety of contingencies. Among them is a provision that if the actual project costs, as verified by an independent audit, fall to such an extent that the developer’s rate of return on debt and equity exceeds 10.7%, the contract price of electricity will be reduced to give ratepayers 60% of the benefit of the lower costs.

If the actual project costs are higher than anticipated and reduce this rate of return, the developer would absorb those losses without impact on rates paid by consumers. This mechanism in the contract ensures that the developers of the project will not reap overly large profits, the DPU explains.

The contract is expected to increase electricity customers’ bills by 1.3% to 1.4% for residential customers and by 1% to 2.1% for commercial and industrial customers. On average, the bill of a typical NSTAR residential customer using 500 kWh of electricity per month will increase by $1.16 per month.

With the DPU's approval of this contract, the Cape Wind offshore wind project has secured contracts for 77.5% of its output. The DPU already approved a 15-year PPA for National Grid to buy 234 MW from the project.

“This decision helps secure the position of Massachusetts as the U.S. leader in offshore wind power, launching a new industry that will create jobs, increase energy independence, and promote a cleaner and healthier environment,” says Cape Wind President Jim Gordon.

“With this decision, Massachusetts electric consumers have secured an abundant, inexhaustible and clean energy resource that provides price stability and avoids all of the external costs of fossil fuels,” he adds. “Finally, our region will no longer be at the end of the energy pipeline; by harnessing an endless supply of offshore wind power, we will be producing homegrown and clean energy right here.”




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