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HISTORY OF DELAWARE OFFSHORE WIND POWER FARM:
Compiled for the League of Women Voters of Delaware
Lisa Pertzoff
May 2006: The impact of electricity deregulation in early 2006 produced sudden large increases
in residential electric bills, causing a public outcry. In response, the Delaware Legislature passed
House Bill 6, the Electric Utility Retail Customer Supply Act (EURCSA). The bill mandated the
development of a long-range plan to deal with electricity supply and demand in Delaware called
an Integrated Resources Plan (IRP). In addition, Delmarva Power was directed to issue a
competitive Request for Proposals (RFP) for a long-term Power Purchase Agreement (PPA), a
10–25 year contract for new power generation within the State containing criteria based on cost
effectiveness as measured by price stability, reductions in environmental impact, benefits of new
and emerging technology, and several other factors.
Late fall 2006: Three bidders responded to the RFP: NRG proposed a coal gasification plant
at its Indian River location; Conectiv Energy and Supply, Inc. (CESI) submitted a bid for
traditional gas fueled power; and Bluewater Wind’s (BWW) bid was for an offshore wind farm.
The LWVDE became involved when examination of the RFP, released in October 2007,
revealed scoring criteria (evaluation points) favoring bidders utilizing fossil fuels rather than
renewable sources such as wind.
December 2006: The League submitted written testimony to the Public Service Commission
(PSC), expressing its concerns publicly for the first time. These centered around the bid scoring
criteria, the true cost of burning fossil fuels, and the long range impact on climate change of
emitting CO2 into the atmosphere.
March - April 2007: The situation had been gathering public momentum for several months
and was by now a high profile issue, attracting the attention not just of the press and elected
officials, but also of large numbers of private citizens, other public policy makers, and
conservation agencies throughout the State. These entities were expressing virtually unanimous
support for offshore wind power. The exceptions were CESI, NRG, and some labor unions.
Delmarva Power submitted its draft IRP to the PSC, objecting to negotiating a long-term power
purchase agreement, instead proposing continuation of its current policy of using short-term
rolling three-year contracts. Its arguments were based on what it claimed would be increased
costs of the alternative as well their belief that no new power generation within the State’s
borders is necessary. This turned out to one of a number of objections which, when taken
together, created an impression that Delmarva was disinclined to embark on any course other
than business-as-usual. The League responded to the PSC’s call for public hearings by
submitting testimony reinforcing its concerns that Delmarva had not complied with the intent of
the law, and that the argument for the use of short-term contracts was flawed in several respects.
The Independent Consultant (IC), hired by Delmarva to evaluate the three bids, released its
recommendations, awarding the greatest number of evaluation points to CESI for a gas-fueled
plant. The LWV again submitted testimony to the PSC, expressing disappointment at the lack of
clarity and transparency of the process, and forcefully reiterating its concerns by stating that it
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opposes any new power generation that emits CO2 or other harmful emissions, while supporting
conservation, efficiency, price stabilization, and the timely transition to renewable resources.
Delmarva Power evaluated the three proposals and, in accordance with the IC’s report,
recommended the CESI proposal. This reinforced the impression that Delmarva had adopted a
different interpretation of EURCSA than many others, and that the RFP’s and proposals had
been designed and evaluated accordingly. They repeated their position that there is no need for
any new large-scale, in-state power generation, claiming its current system will be sufficient
when combined with increased energy conservation and efficiency. The League testified once
more, pointing out what it considered to be fundamental flaws in the approach and reasoning
behind the recommendations, reiterating its previous testimony and warning that although energy
conservation and efficiency are necessary components, they are by themselves unlikely to fill the
State’s future electricity needs.
May – June 2007: The PSC recommended that the bid be awarded to Bluewater Wind. In
order to secure the required unanimous vote of the controlling agencies,* a compromise was
reached by scaling back the project and adding a provision directing Delmarva to negotiate with
all three bidders for additional, small-scale gas-fired power to act as a backup. The parties were
given 60 days to negotiate, with a requirement that weekly updates be files weekly to the PSC.
Delmarva announced publicly that it would refuse to negotiate. Although it subsequently
modified this stance by agreeing, albeit reluctantly, to continue participating, it nevertheless filed
a petition for rehearing with the PSC, asking that the order be reconsidered. Along with a large
number of others, the League submitted testimony against the petition, which was denied.
July – August 2007: Delmarva filed suit in court to have the PSC’s order reversed. It later
postponed this action until mid-September 2007, pending the outcome of the backup power
negotiations. At a hearing in early August, the public was made aware for the first time of the
status of these negotiations, although detailed information was not available.
The parties asked for and received an extension of the 60-day deadline, pushing it forward to
September. All parties stated they are satisfied with the progress made so far and expected to
present their conclusions in mid-September.
Mid-September 2007: Delmarva released the so-called “term sheets,” or business proposals, of
all three bidders, Bluewater Wind for its scaled-back wind farm, and NRG and Conectiv
competing for a smaller, gas-fired backup plant in Sussex County. This was the first time the
public had any access to specific cost information concerning the three bids.
Delmarva again reacted negatively, claiming that the proposed wind farm exposed customers to
unacceptable costs and risks. It took issue with the fact that BWW’s term sheet contained higher
costs than the original; however, it is worth noting that Delmarva’s persistent objections
contributed heavily to the final decision requiring BWW to reduce its proposed project size by
25%, thereby reducing economy-of-scale benefits.
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Furthermore, in spite of repeated requests by BWW, Delmarva refused to release its per-kilowatt
hour pricing structure, making it impossible for BWW to construct a direct cost comparison.
Throughout the period, Delmarva went to great lengths to emphasize that the term sheets in no
way constitute an agreement or contract; indeed there was widespread speculation that it was
merely continuing to establish a basis for renewing its lawsuit, currently on hold until a final
decision is made.
About the same time the term sheets were released Delmarva launched a survey to determine if
customers favor wind-powered electricity, and, if so, the extent to which they are willing to pay
for it. This survey is restricted to Delmarva customers, apparently in response to the company’s
reservations about the results of a recently published large, randomized University of Delaware
study surveying the State population in general. This study showed overwhelming support for
wind power even if it were to cost more.
OCTOBER – NOVEMBER 2007: On October 29, 2007, the PSC issued its report on the three
term sheets, finding BWW’s proposal unacceptable due to increased costs and other factors.
This produced a huge outcry from environmentalists, advocates, and the public in general. The
PSC received more than 2,000 letters in one day, almost all of which were in favor of the
offshore wind proposal. Once again, the LWVDE submitted written testimony expressing
disappointment over the conclusions of the report as well as the process whereby those
conclusions were reached.
The PSC held a public hearing on the matter on November 20, 2007. BWW further modified its
pricing structure in order to address some of the concerns expressed in the PSC October 29 staff
report. Public testimony was extensive, including a powerful presentation by former Governor
Russell Peterson in favor of the offshore wind proposal. The League briefly summarized its
written testimony in an oral statement.
In response, the PSC issued an order on December 4, 2007, based on its staff’s updated
procedural recommendations, calling for further negotiations between Delmarva Power and
BWW, arbitrated by Dr. Lawrence Hamermesh of Widener School of Law, and limited to the
long-term contract for wind power, leaving discussion of back up power for a later date. All
parties were instructed to develop a standard method of comparing pricing structures. A revised
timetable was ordered, calling for a final decision to be made on December 18, 2007.
DECEMBER 2007: At the PSC hearing on December 18, 2007, to the astonishment and
outrage of many onlookers, including representatives of the LWV, the PSC tabled the entire
matter. It is not possible to know exactly why, since PSC members cannot discuss it, but it was
widely speculated that a few members of the General Assembly who had strong objections to the
offshore wind proposal instructed the Controller General to vote against it. Since a unanimous
vote is required of the four decision-making agencies empowered by the statute, this would have
resulted in effectively ending the current effort to obtain offshore wind power energy in
Delaware. Thus, tabling the measure was the only way to keep it alive.
1/15/2008
The committee report in the OP is one of two measures scheduled for a vote. The other one is a measure directing approval of the wind farm. Surveys by the University of Delaware show 92% of the Delaware public support the offshore wind farm.
If it gets shot down in an open vote in the legislature there is going to be a significant backlash.
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