Court upholds Cape Wind PPA

The proposed Cape Wind offshore wind project won a legal victory today, as the Massachusetts Supreme Judicial Court has upheld the power purchase agreement between Cape Wind and utility National Grid.

Back in November 2010, the Massachusetts Department of Public Utilities approved a long-term contract between National Grid and Cape Wind. Under the approved power purchase agreement, the utility agreed to buy half of the output from Cape Wind’s project for 15 years. Pricing for the power would start at 18.7 cents per kilowatt-hour, escalating 3.5 percent annually. The state regulator concluded that the benefits of the contract exceed its costs, even though the Department found that the contract will most likely cost ratepayers between $420 million and $695 million above market prices over its 15-year term.

Many parties participated in the case before the Department of Public Utilities over whether the contract should be approved. When the Department approved the contract, several of these parties appealed to Massachusetts’ highest court. These appellants included trade groups for industrial energy consumers, traditional power generators, an international energy company and a group opposed to the project. Challengers filed a variety of legal claims, including that the Department lacked authority to approve the contract given its high costs, alleged lack of competitive bidding, and even potential violations of the Massachusetts Green Communities Act.

Today the Supreme Judicial Court issued its written opinion upholding the Department’s decision to approve the PPA. In the opinion, the court found that the record before the Department contained sufficient evidence for the Department to conclude that the Cape Wind contract’s special benefits exceeded those of other renewable energy resources. The court also agreed that it was proper for the Department to find that those environmental benefits would accrue to all of National Grid’s customers, and thus to spread the contract’s above-market costs across its rate base.