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Utilities Raise Constitutional Challenge to Forced Cape Wind Power Purchase

NStar and Northeast Utilities have told the Massachusetts Department of Public Utilities that it does not have the authority to require the companies to buy Cape Wind’s high-priced electricity as a condition of their merger and that forcing them to do so may violate the Constitution.

The statements were made in a joint filing by the two power companies to the DPU October 12 and are part of a brief submitted in support of the merger.

“The Department has no authority under (statutory provisions) to impose a requirement to enter into a long-term contract for renewable power,” the brief says. “A condition that is unilaterally imposed by the Department as a merger condition, which specifies that NSTAR Electric is required to purchase the power of a company located within Massachusetts could invoke concerns of a potential violation of the Dormant Commerce Clause of the U.S. Constitution.”

The doctrine of the Dormant Commerce Clause prohibits a state from engaging in actions that discriminate against out-of-state business and prevents states from engaging in protectionism in which an advantage is given to in-state industries at the expense of out-of-state competitors, the brief says. However, the companies point out in a footnote that the constitutional issue “would not exist if NSTAR Electric were to unilaterally decide to enter into a contract with Cape Wind.”

Cape Wind told the DPU in a September 28 letter that purchase of its electricity should be a condition of the merger.

The Cape Wind proposal, touted by the Obama administration as America’s first offshore wind farm, is enthusiastically supported by the administration of Massachusetts Gov. Deval Patrick. But the project, which would constitute 130 turbines towering 440 feet above ocean level, and spreading across almost 50 square miles of Nantucket Sound, would obliterate the Mashpee and Aquinnah Wampanoag Tribes’ unimpeded view of the rising sun. This view is crucial to a ceremony that is central to their identity, and the development could destroy the ocean bed that was once the dry land where their ancestors lived and died.

It is not clear what impact the companies’ constitutional challenge will have on the pending merger between NStar and Northeast Utilities. NStar transmits and delivers electricity and gas to 1.1 million customers in 81 Massachusetts communities; Northeast Utilities is a Connecticut-based Fortune 500 energy company that operates New England’s largest energy-delivery system. “Since the merger was announced last year, regulators added a requirement that such deals must advance the state’s clean-energy goals, which include developing offshore wind [power],” the Associated Press said. “The state also made a request, still pending, to stay proceedings for a review of the merger’s effect on rates—a lengthy process that could lead to a merger-killing delay.”

Republican State Rep. Brad Jones, minority leader in the House, said the state’s strategy is calculated to pressure NStar to buy power from “a favored developer,” the article said. Jones called the regulators’ move “the great administration shakedown of NStar.”

Jones is not alone in characterizing the potential NStar arrangement as a shakedown. Environmental attorney Robert F. Kennedy Jr. accused Patrick’s administration of “trying to hold hostage the proposed NStar–Northeast Utilities merger unless the two electric companies agree to buy Cape Wind’s power,” in an op-ed piece for The Wall Street Journal. “But the state says it is simply upholding the law and protecting the public interest,” the report said. Last year, the Massachusetts Department of Public Utilities approved a power purchase agreement for Cape Wind to sell half of its power to National Grid for 18.7 cents per kilowatt-hour (kWh) with a 3.5 percent increase each year, bringing the cost to 30 cents per kWh by the end of the 15-year license. Massachusetts’s consumers paid around nine cents per kWh last year. In June the Massachusetts Supreme Judicial Court dismissed a motion by Cape Wind that would have suppressed evidence that its power purchase contract with National Grid is two and a half times the cost of green energy from other providers. The motion was made in response to an appeal, filed by the Alliance to Protect Nantucket Sound, the Associated Industries of Massachusetts, TransCanada and the New England Power Generators Association, that sought to compel the agency to reopen its review of the agreement following an announcement that NStar was able to secure cheaper power from land-based renewable-energy projects. NStar pays less than 10 cents per kWh for its power from three New England wind farms.