Maryland’s O’Malley to unveil new approach to wind power

Source: Michael Dresser • The Baltimore Sun • Posted: Monday, January 23, 2012

Bill is based on ‘industry friendly’ New Jersey model

Gov. Martin O’Malley is to unveil today a new approach to promoting offshore wind power that he hopes the General Assembly will find easier on consumers than last year’s plan. The new approach borrows ideas from a New Jersey bill signed by Republican Gov. Chris Christie, according to O’Malley administration sources.

Gone from this bill will be any charges to consumers before power from the envisioned wind farm — to be situated 10 miles off the Ocean City coast — actually begins to turn on the lights. The new, cleaner power could require electricity customers to pay an extra $2 a month, but there would be a hard-and-fast cap on those added costs, the sources say.

In a sweetener for the power industry, the administration has scrapped the old bill’s requirement that utilities sign long-term contracts under which they would have had to purchase off-shore wind energy. Opposition to that provision helped torpedo last year’s bill.

But the new proposal would still provide a market for the wind farm’s energy by requiring suppliers to get a set amount of their power from wind, as they do now from solar sources.

These were among the provisions outlined for The Baltimore Sun ahead of the governor’s public announcement of details of the bill, one of the centerpieces of his legislative agenda this year.

The legislation will be a second chance for O’Malley to win national recognition as a leader in the effort to develop energy sources other than the fossil fuels that scientists say contribute to climate change. The governor also is expected to promote the plan as a way of creating jobs in so-called “green” energy industries — 1,800 in the construction phase and 360 once a wind farm is operating.

If the changes come in as expected, a powerful Senate committee chairman said, the bill has a shot at passage.

“I think it has a better chance of coming out [of committee]. It’s easier for me,” said Sen. Thomas “Mac” Middleton, chairman of the Finance Committee and the lawmaker who pulled the plug on O’Malley’s effort last year. “This proposal gives me a whole lot less heartburn.”

The legislation will still face fierce opposition from Republicans and some Democrats. Senate Minority Leader E.J. Pipkin said offshore wind power was far too expensive, compared with such energy sources as natural gas. He also dismissed O’Malley’s vision of a new Maryland industry.

“The idea that there are going to be green jobs from this program is a myth,” the Eastern Shore Republican said.

While the bill would still add an estimated $1.50 to $2 to residential consumers’ monthly bills, the cost would not come in the form of a line-item surcharge. Rather, suppliers would factor the additional cost into the rates they charge utilities and, by extension, consumers. Administration sources said the extra cost would be subject to a strict limit. If the Public Service Commission projects a cost of more than $2 a month — in 2012 dollars over 20 years —the project would be abandoned.

The administration sources said the new bill will specify that consumers would not be charged before the energy is actually produced. The administration said the old bill would have worked the same way, but it was not able to persuade legislators. This version is expected to be more explicit in that guarantee.

Middleton said such a provision was critical.

“You can’t expect that the ratepayer’s going to have all the risk,” the Charles County Democrat said. “It’s reasonable to bear some of the costs but not all the costs.”

Last year’s bill was criticized as being too prescriptive, forcing utilities that sell directly to consumers to sign 20-year agreements that could have gone on their books as liabilities and damaged their credit, raising the cost of borrowing.

This year, O’Malley will propose a different approach — one that requires wholesale suppliers to purchase 2.5 percent of their power supplies from offshore wind producers starting in 2017 if certain conditions are met.

The provision follows the pattern of an existing law requiring suppliers to use a minimum level of solar power — 0.06 percent now and 2 percent by 2022 — but unlike the solar requirement, the wind power standard would not increase over time.

First, however, the PSC would consider the company’s wind-power plan to ensure it was feasible and the price reasonable. Once it got the green light from the PSC, the company could sell into a Maryland market with a guaranteed minimum demand built into the law. The PSC also would have to commission an independent study to verify that the program would produce a net benefit for the state.

An O’Malley administration official said the legislation was patterned after an “industry friendly” New Jersey bill adopted in 2010 and signed by Gov. Christie.

Jim Lanard, president of the Washington, D.C.-based Offshore Wind Development Coalition, said he’s “very optimistic” that the New Jersey approach would draw interest in developing offshore wind farms.

“You’re going to see great competition,” Lanard said. With no offshore wind projects yet under construction in the United States, he said, “there’s a lot of pent-up interest within the industry.”