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Maine PUC reverses course, will take second look at two wind power deals

By: Ethan Howland |

Pointing to recent changes in the power markets, the Maine Public Utilities Commission decided Wednesday to take a second look at term sheets approved in December for power purchase agreements from two wind farms.

PUC Commissioner David Littell, who voted against the move, said reopening previously approved agreements could keep generators and power suppliers from trusting the commission’s solicitations for energy supplies.

About a year ago, the PUC issued an RFP for renewable generation and two months ago approved the term sheets for two projects, finding that they would save ratepayers up to $70 million.

Under the term sheets, First Wind agreed to sell the output and capacity from the planned 73-MW Weaver wind farm for $53/MWh, with a $1.50/MWh annual increase over 25 years. NextEra Energy Resources would sell capacity and energy from the 44-MW Highland wind farm for $46.75/MWh, with a 2% yearly escalator over 20 years.

The developers were crafting PPAs based on the term sheets when the PUC decided to reconsider its earlier action, citing a recent drop in power prices, which could change the value of the PPAs.

The decision could also affect Apex Clean Energy’s 90-MW Downeast wind farm, which has an approved term sheet with the PUC, the commission said.

The makeup of the PUC changed after the commission approved the term sheets in December on a 2-1 vote. Former PUC Chairman Tom Welch, who voted for the term sheets, retired at the end of December. He was replaced as chairman by Mark Vannoy, who opposed the term sheets in December, saying they might saddle ratepayers with unnecessary costs. Carlisle McLean, who joined the PUC last month, voted to review the contract terms again.

Vannoy said reopening the term sheets was an unusual step, but the harm it could do to the state’s reputation was outweighed by the need to protect ratepayers from possibly burdensome contracts. First Wind and NextEra were aware of the risks in negotiating the contracts, he said.

According to Vannoy, contract pricing should be at below-market prices to reflect the reduced risks that project developers have by entering into the PPAs.

“Generators should offer prices at significant discount,” he said.

Average wholesale prices in Maine in January were $62.85/MWh, about half the price that was assumed as the starting point in analysis done to review the contracts, Vannoy said. The fact that the short-term analysis was so far off throws doubt on the long-term analysis, he said.

Power prices, however, have rebounded since January and are back in the range assumed under the contract analysis, Littell said. The value of the PPAs hasn’t changed much since December, he said.

The term sheets represented “clear and extraordinary” deals for ratepayers, according to Littell, who said it made sense to lock in long-term prices in today’s low-price environment.

If fewer parties participate in Maine’s energy solicitations, prices will rise, Littell said, noting that NextEra supplied the state with standard offer service.

In comments this week, NextEra opposed reopening the term sheets, saying that “short-term forecast changes should not serve as the basis for undermining the state of Maine’s established process for contracting long-term resources.”

First Wind, owned by SunEdison, said the PUC’s move could hurt a pending commission RFP that includes renewable and fossil-fuel resources.

“Companies considering submitting proposals in response to the 2015 RFP should be expected to seriously question whether to make a similar yearlong effort if all of their time and resources may be wasted through a last-minute, unsubstantiated change of mind by the commission,” the company said.

Emera Maine, a possible PPA counterparty, opposed reconsidering the term sheets.

“To reconsider a prior order when oil and gas prices rise or fall in the future would insert a great deal of uncertainty and unpredictability into the long-term contracting and regulatory process,” Maine’s second-largest utility said.

The Maine Public Advocate Office, which represents ratepayers, opposed reconsidering the term sheets.