By BOB SALSBERG
BOSTON
http://www.businessweek.com/ap/financialnews/D9QTTVBO0.htm
A Massachusetts law requiring utilities to purchase more electricity from renewable energy sources has helped make the state more energy efficient but also threatens to increase the delivery costs of electricity by 7 percent over the next four years, Attorney General Martha Coakley told a legislative committee on Wednesday.
The Green Communities Act, signed in 2008 by Gov. Deval Patrick, was intended to help Massachusetts wean itself off fossil fuels and reduce emissions that lead to global warming.
In remarks prepared for a legislative oversight hearing, Coakley indicated that a review by her office found plenty to like about the three-year-old law, along with some concerns.
“In short, we have found a number of benefits — including increased energy efficiency programs that lead to savings for many consumers,” Coakley said. “But we also have found that the (law’s) programs have escalating costs that will cause an increase in electricity rates.”
The cost of implementing the law will exceed $4 billion over the next four years, Coakley said, resulting in the estimated 7 percent increase in the total delivered costs of electricity to consumers and businesses. She noted that Massachusetts electric customers already pay some of the highest rates in the nation and that the state is “likely to remain at the top of that list.”
The attorney general told the panel she supported the policy goals of the law, particularly the desire to address climate change and make the state more energy efficient. She cited a report from the American Council for an Energy-Efficient Economy that ranked Massachusetts as the nation’s most energy efficient state.
Enhanced regulatory provisions under the law have helped save $389 million for consumers in utility rate-setting procedures, Coakley added.
The Green Communities Act requires utilities to purchase more electricity from renewable power sources, with a goal of having 25 percent of electricity coming from renewables — including wind turbines, solar panels and biomass generators — by 2030. It also asks utilities to consider cost-effective alternatives to buying more electricity or constructing new power plants when demand for electricity increases.
Richard Sullivan, the state Secretary of Energy and Environmental Affairs, said the law was the administration’s most significant green energy achievement to date. He said solar energy has become “commonplace” in Massachusetts, and by one count the state now has nearly 5,000 clean energy companies employing more than 64,000 workers.
State officials said a requirement that utilities seek long-term contracts for renewable energy has made solar, wind and other clean energy projects more viable and easier to finance. Sulllivan and Ann Berwick, chairwoman of the state Department of Public Utilities, both cited a 15-year contract National Grid signed to buy half the power from Cape Wind, the nation’s first offshore wind farm planned for Nantucket Sound.
“A long-term contract provides the certainty that can be critical in making financing available,” Berwick said.
In her testimony, Coakley outlined a number of steps that could be taken to improve the law, including adding a requirement that all long-term contracts for renewable energy be put through a competitive procurement process.
“This will go a long way to ensure transparency and competition to reduce costs,” Coakley said.
She also criticized “overly-generous incentives” the law provides for companies that meet energy efficiency goals, including the guarantee of at least a 4 percent profit on contracts for long-term renewable energy contracts.