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National Grid and Cape Wind have filed a contract with the Massachusetts Department of Public Utilities (DPU) under which National Grid will buy power from the offshore wind farm, which is expected to come online by the end of 2012. Under the Green Communities Act, all of the Massachusetts investor-owned utilities are required to enter into long-term contracts to purchase at least 3% of their electricity supply from renewable generators.

Under the terms of the contract - which must be approved by the DPU - beginning in 2013, National Grid would purchase from Cape Wind 50% of the wind farm’s output, including electricity, renewable energy certificates (RECs) and other potential market attributes for $0.207/kWh. That price, which assumes existing federal tax incentives, would increase 3.5% per year during the 15-year term of the contract.

The $0.207/kWh breaks down to $0.125/kWh for energy, $0.067/kWh for RECs $0.015/kWh to remove hedging risk.

Based on its forecasts of what customers will pay for electricity in 2013, National Grid projects this will translate into a total monthly bill increase of $1.59, or roughly 2% per month, for a typical residential customer who uses 500 kWh per month. National Grid will only be purchasing slightly more than 3% of its total electricity supply from Cape Wind.

According to Cape Wind, the project will provide stable energy prices for 15 years by insulating part of National Grid's energy supply from the price volatility of fossil fuels.

Energy research firm Charles River Associates concluded that the wind project will reduce wholesale electricity prices in New England by $4.6 billion over 20 years by displacing the most expensive sources of power.

The filing includes two contracts. The first, if approved, would enable National Grid to purchase 50% of the output of the wind farm for its customers. The second contract would facilitate the purchase of the remaining 50% by another party or parties.

SOURCE: National Grid    

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