ISC » Google’s $5 Billion Wind-Power Bid Draws Opposition on Return Guarantee

Google’s $5 Billion Wind-Power Bid Draws Opposition on Return Guarantee

A Google Inc (GOOG).-backed effort to build a $5 billion undersea power line supporting wind energy from New Jersey to Virginia faces opposition from state officials and utilities.

The Maryland Public Service Commission and the National Rural Electric Cooperative Association are among those questioning Atlantic Wind Connection’s request that the Federal Energy Regulatory Commission approve incentives to build the project, including a guaranteed 13.58 percent return on equity for its development.

“They want consumers to pay for them to go through the planning process,” said Jay Morrison, vice president for regulatory affairs at the cooperatives group based in Arlington, Virginia, in a phone interview yesterday.

The power line buried beneath the sea floor would serve as a 300-mile (483-kilometer) transmission backbone linking to wind turbines off the coasts of New Jersey, Delaware, Maryland and Virginia. Trans-Elect Development Company LLC, an independent transmission company based in Bethesda, Maryland, announced the project in October.

Google of Mountain View, California, operator of the world’s most popular Internet search engine, has a 42 percent stake in the project, company spokesman Parag Chokshi said in an e-mailed statement. Investors also include Tokyo-based trading company Marubeni Corporation and Good Energies, a clean-energy investment firm based in Zug, Switzerland. The first phase, which could be operational as early as 2016 will cost about $1.3 billion, sponsors say.

Project Briefing

The project’s sponsors have scheduled a briefing on its next development phase tomorrow at the law offices of Dewey & LeBoeuf LLP, Atlantic Wind’s attorneys, in Washington.

Atlantic Wind’s future depends on regulatory approval. The Energy Policy Act of 2005 ordered FERC to create incentive rates of return for transmission projects, considered on a case-by- case basis, in order to encourage investment. A transmission developer can apply for such treatment and separately seek approval for a rate formula that will determine the costs ultimately passed along to consumers.

In addition to the guaranteed rate of return on equity, the Atlantic Wind Connection is asking that all costs of the project’s construction be included in its rate base and that it be allowed to recover its costs if the project is canceled for reasons beyond the sponsors’ control.

‘Overly Generous’

The incentives sought “could well be overly generous,” the Maryland regulatory panel said in a January 31 filing with FERC. Subsidiaries of Newark, New Jersey-based Public Service Enterprise Group Inc. (PEG) want to ensure that consumers don’t become saddled with the costs of building the transmission line before grid operators verify it’s needed, the company said in a separate filing the same day.

The Atlantic Wind Connection hasn’t asked FERC to approve a specific rate formula, Bryan Lee, a spokesman for the project, said in a phone interview. Instead, the requested incentive rate approval is “designed to provide some certainty for investors” while regulators and grid authorities consider how best to plan and pay for new transmission lines, he said.

Sponsors intend to ask FERC for a final rate request later this year, according to the group’s filing for incentive rates in December.

Atlantic Wind is also seeking inclusion in regional grid operator PJM Interconnection’s transmission planning process, as well as the U.S. Interior Department’s approval of a right-of- way on the Outer Continental Shelf.

The Interior and Energy Departments announced in February a national strategy to encourage the development of large-scale offshore wind projects, such as the Atlantic Wind Connection.


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