Friday, December 14, 2007

My Letter to the PSC

December 12, 2007

Ms. Arnetta McRae, Chair
Delaware Public Service Commission
861 Silver Lake Boulevard
Cannon Building, Suite 100
Dover, DE 19904

Re: PSC Docket No. 06-241

Dear Ms. McRae:

After months of difficult negotiations, careful analysis and thousands of public comments, the time has come to direct Delmarva Power to execute the Power Purchase Agreement with Bluewater Wind.
There are four compelling reasons for completing a Power Purchase Agreement (PPA) with Bluewater Wind: First, we in Delaware are particularly vulnerable to the potential effects of climate change and rising sea levels. Second, our citizens need relief from continuing toxic emissions from burning fossil fuels. Third, and most crucial in my view, we need the long-term price stability that a wind farm could provide as part of our energy portfolio. Fourth, the PPA now before meets the requirements of EURCSA, and the citizens deserve to have our state government act decisively to secure and protect our long-term interests.
Given the cut in the rate to $98.93 per MWh, the argument that customers can’t afford wind power is losing credibility. In the face of likely increases in fossil fuel prices over the life of the PPA, the wind farm will accomplish one of the chief objectives of EURCSA and provide price stability in a way that no other power source or market mechanism now available can.
Opponents of the wind farm claim that we can't afford it. The simple fact of the matter is that wind power would cost us a little bit more if—and only if—fossil fuel prices remain flat for the next thirty years.
If recent history is any guide, and if the laws of economics are not overturned, we can expect fossil fuel prices to continue to climb over the next thirty years. The PPA now before you offers a unique mechanism to protect us from the cost of these coming price increases.
This is highly unlikely. Natural gas prices have triple over the last ten years. The International Energy Agency (IEA), in its most recent World Energy Outlook, projects that overall energy demand, including natural gas, will increase by 55 percent by the year 2030. [1] The IEA projects that demand for coal power will increase 73 percent by 2030.
At the same time, the need for carbon emission controls will increase the cost of coal power by at least 20 percent, according to an MIT study. [2] Taken together, increased demand, limited supply and the need for further emission controls can only mean sharply higher prices. The proposed wind farm would provide a measure of price stability (one of the objectives of EURCSA) as part of our energy portfolio.
There has been considerable discussion of whether the costs (and benefits) of wind power should be restricted to SOS customers or should be extended to all of Delmarva’s customers. This is a point that can only be decided by the General Assembly. However, this question is not on the table and should not hold up approval of the PPA.
If the PSC and other state agencies believe that it would be appropriate to extend the customer base, it should be presented to the General Assembly in the context of an approved PPA. We have all gained an appreciation of the complexity of this process, and should not want the possible need for action on one point—extraneous to the PPA itself—to provide an opening to revisit the entire range of issues reflected in the PPA.
I wish to voice my appreciation of the extraordinary work of the Commission, the other state agencies, and most especially the Commission staff. I should also note that the PPA now on the table vindicates your decision to direct that negotiations continue and give Professor Hamermesh a more active role. His leadership in resolving the many difficult issues presented in these negotiations has resulted in a deal that will provide long-term economic benefits for ratepayers.
Through the hard work of many, we now an opportunity to accomplish something scarcely imagined a year ago. I urge you exercise your authority under EURCSA and adopt the PPA now before you.

Thomas Noyes



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