Following a lengthy Delaware Public Service Commission (PSC) meeting last Tuesday, commissioners voted that Sussex County should become the home to some sort of wind farm as well as a new traditional gas-fired power plant. However, the three other state agencies that have been deliberating what if any generation should be built in Delaware ended up deferring decision so that they could continue internal deliberations.

“The PSC voted unanimously (5-0) to direct Delmarva Power & Light to enter into negotiations with Bluewater Wind on an offshore wind farm,” said Michael Sheehy, a spokesman with the Delaware PSC. “In addition, the PSC asked Delmarva Power & Light to enter into negotiations with Conectiv and NRG for gas turbine backup generation.”

The PSC staff recently took three submitted power generation construction bids and turned them into a “hybrid” plan that it recommended for Sussex County. The staff proposed that Conectiv Energy build a natural gas plant while Bluewater Wind constructs a wind park to balance reliability with clean renewable power sources (see NGI, May 7).

The wind proposal would involve the construction of 200 large windmills seven-to-nine miles offshore of the Atlantic beach resorts of Rehoboth Beach or Bethany Beach, DE. There has been some uncertainty and opposition surrounding the feasibility and sight-lines of such a project.

The spokesman said the commission now needs to draft an order, but that is expected to take a few weeks, which might make it ready by the commission’s May 22 meeting. “The commission basically accepted the commission staff’s plan with two modifications. One modification was that NRG, which originally submitted a coal plant proposal, be permitted to bid on the turbine plant side,” said Sheehy. “Basically, NRG came up and said ‘we understand you didn’t pick coal, but we are an energy company, so don’t you think we ought to get a chance?’ I think the commission probably felt that having two people bid is a better competitive situation than a single bidder.” Sheehy said that while a coal gasification plant is now likely off the table, NRG might be able to pull something off.

The commission also disagreed with staff’s recommendation that the wind and gas turbine projects should be looked at as a package deal. Instead, the PSC said they should be negotiated by themselves.

As for the current situation, Sheehy said until the commission order comes out and the other agencies make decisions, the plan is on hold. “We think things should move forward, but it will probably be at least two weeks until we get a real firm idea as to what the path forward looks like. Judging from the statements made at the meeting by the other agencies, we think their votes will be cast in time for the May 22 meeting.”

Delaware state consultants last Monday recommended that partial reregulation, with the establishment of a state-regulated Energy Authority tasked with building new power generation facilities, would be a wise move for the state.

“Delaware cannot simply turn the clock back to pre-1999 and try to reinstate regulation,” said Nancy Brockway of NBrockway & Associates in the report commissioned by Delaware’s legislature in response to the crisis in power rates for customers of Delmarva Power & Light (DP&L). “Rather, new institutions are needed to identify the public’s ‘risk preferences’ and to implement them, consistent with the public’s determinations.”

The recommendations in the report propose a model for governance, with the specific policies to be the function of a public process. This approach responds to the “failure of traditional regulation” since the 1970s to consistently meet the needs of consumers and the public in a least-cost way, and the inability of competition to do better in an industry where production must equal demand practically every second, generation cannot be stored, capital costs are high, and public choices must inform resource decisions.

“Regulation worked fairly well to restrain firms that were pushing in the right direction but needed to be prevented from gold-plating their plant or playing favorites among their customers,” Brockway said. “It works less well to make a risk-averse firm take firm action in an atmosphere of great uncertainty. The electric industry today is nothing if not uncertain.”

The report said a power authority can be the builder/buyer of last resort, ensuring reliability at a reasonable cost when the market does not step up to the task. The power authority can arrange for building new resources, and managing them or hiring out the operations, so that the market suppliers will have competition from a cost-based alternative. The report noted that such an authority has operated successfully in New York, and similar authorities are authorized or operating in other jurisdictions.

With power generation proposals currently on the table, some questioned the timing of the report’s release.

“The untimely release of a consultant’s report probably didn’t cause too much of a headache for the Delaware Public Service Commission,” an editorial said in Delawareonline. “The current commotion over picking a new electricity source — wind, gas, coal or nothing — probably has kept members too busy to notice. But Delaware probably isn’t ready to hear a recommendation that it should create a state-run energy authority too.”

The editorial noted that the recommendation should be considered along with several others, but that a lot is happening at the regional and federal level on the whole issue of power generation and Delaware certainly has to “look out for itself, but not at the cost of bucking trends.

“A deliberate, go-slow approach is called for. Each of the ideas that has come forth needs to be considered against a regional and national background,” the editorial added. “An independent authority competing with already formed ventures may not be the best idea for this state.”

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