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Wal-Mart challenges Cape Wind’s high prices

By Erin Ailworth
Globe Staff / June 17, 2010

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The high cost of power from Cape Wind is being challenged by Wal-Mart Stores Inc., the largest company yet to voice complaints about the price it would have to pay for the wind-generated electricity.

In filings with the state, Wal-Mart said the high prices set by Cape Wind’s first contract to sell electricity will lead to higher costs for the retailer. Wal-Mart already pays more than $2 million a year to power 28 Massachusetts stores served by National Grid, which negotiated the deal with the offshore wind farm.

The contract gives Cape Wind, which is expected to begin generating electricity in 2013, a starting price that is more than double the current basic residential rate for conventional power. The agreement is subject to approval by the Department of Public Utilities, which held the first public hearing on the deal last night in Bridgewater.

Wal-Mart “supports the intent of the Cape Wind project,’’ but questions National Grid’s cost estimates, as well as how those costs will be passed on to customers, said Bill Wertz, a spokesman for the retailer.

Wertz said Wal-Mart routinely becomes involved in discussions about utility rates “because that’s an important factor in our ability to save customers money at our stores. It’s a big cost for us.’’

Wal-Mart’s filing highlights the challenges of promoting projects like Cape Wind to companies and other consumers eager to avoid higher costs. Clean energy typically costs more to produce than fossil fuel-generated power.

The fact that Cape Wind’s cost is higher is openly acknowledged by its developer and the state. The Legislature crafted laws and regulations requiring that by 2020, Massachusetts utilities buy at least 15 percent of their power from renewable energy sources. The state also requires utilities to pay a premium of 6.1 cents per kilowatt hour for such power, in effect subsidizing green energy generators such as Cape Wind, the biggest proposed green project in the state.

The idea was to jump-start clean energy in Massachusetts and create a new industry around it, and the higher costs of renewables were seen as part of the price of that initiative — although some think those costs may come down over time.

At a public hearing on the contract last night, National Grid general counsel Ron Gerwatowski said Cape Wind was essential if the state was serious about using sustainable resources to generate a large share of its electricity. “What we have seen is a huge gap, a renewable resources gap,’’ he said. “Without huge projects, the gap is insurmountable.’’

Opponents of Cape Wind see the protest from Wal-Mart as further proof that Cape Wind is a bad deal.

“We’re seeing a number of intervenors, including Wal-Mart, and I think they’re all responding to the exorbitant price of this contract,’’ said Audra Parker, the president of the Alliance to Protect Nantucket Sound, which has long opposed the wind farm. She said that state approval of National Grid’s proposed contract with Cape Wind “will be crushing to households, municipalities, school systems, and businesses trying to make ends meet.’’

Robert Rio, senior vice president at the trade group Associated Industries of Massachusetts Inc., which represents 6,000 employers, said his group also believes that Cape Wind is too expensive for consumers.

“This is significant money. I don’t see the cost effectiveness there,’’ Rio said.

National Grid spokeswoman Jackie Barry said the utility is prepared to defend its contract to Wal-Mart.

“They’re a large customer asking questions about a filing. We think we have some pretty good answers to their questions,’’ she said. In filings with the state, National Grid has called the deal “a critical starting point to fill a gap in meeting renewable energy targets regionally.’’

Some advocates believe the extra cost of Cape Wind power is a reasonable price to pay for cleaner energy. George Matouk Jr., president of the Fall River linen manufacturer John Matouk & Co., said Cape Wind will help Massachusetts build a clean energy economy and become less dependent on fossil fuels.

“I support the Cape Wind project even if it means there’s going to be a moderate, short-term increase in electric bills,’’ Matouk said, adding that his company is a National Grid customer and uses about 300,000 kilowatt hours a year. “I think that the potential benefits from having more wind energy in Massachusetts, from an economic point of view, would offset that.’’

Renewable energy advocates say Wal-Mart’s challenge to the contract raises questions about the retailer’s commitment to clean energy. Wal-Mart has promised to cut greenhouse gas emissions and said it would push suppliers to “green’’ their operations. Wal-Mart recently installed wind turbines of its own at a new store in Worcester.

Dan Bakal, director of electric power programs for the green investment coalition Ceres in Boston, said it is typical for large companies to express concern about electricity rates. Wal-Mart’s filing was surprising, he added, because of the company’s previous attention to environmental issues.

“It is a bit of a disconnect around their commitments to efficiency and renewables and their supply chain,’’ he said.

Mark Rodgers, spokesman for Cape Wind, said Wal-Mart’s filing was “unfortunate’’ for the company’s reputation as a supporter of renewable energy.

“They have, with great fanfare, introduced a lot of initiatives to try to green up their corporate image,’’ Rodgers said, “and, I think, by coming out against the contract for the highest profile clean energy project in the country, that really sets them back.’’

Yesterday’s hearing was the first of three scheduled by the state Department of Public Utilities, which must sign off on the National Grid contract. The other two hearings will be held in Nantucket on Monday and in Worcester on Tuesday.

Attorney General Martha Coakley, the state’s consumer advocate, also is reviewing the contract, although final approval will be up to public utility officials.

Erin Ailworth can be reached at eailworth@globe.com.