It Time To Do The Deal

We seem to have a pretty good deal on the table. But it's still not good enough for Delmarva Power, as arbitrator Lawrence Hamermesh pointed out in the transmittal letter that accompanied the agreement:

Enclosed for filing is the form of Power Purchase Agreement (PPA) prepared in accordance with the agencies' December 4, 2007 Order. While it is labeled an "agreement," and Bluewater has indicated that it is prepared to enter into that agreement, I wish to make clear that there are important aspects of it which Delmarva opposes, and there is therefore no mutually acceptable PPA at this point. I will submit by the end of the day on Wednesday a summary of the several issues on which it was necessary for me to specify a resolution to be embodied in the agreement, and my rationales for resolving them as I did. Even though the price has come down, the "News Journal" reports that Delmarva Power is still balking at the deal, quoting spokesman Bill Yingling:

Yingling said Delmarva continues to have concerns that offshore wind power would cost customers too much. Other forms of renewable energy, such as onshore wind, could be purchased from out of state, he said. The onshore option is not currently on the table, however, as the agencies are following a legislative directive to seek new Delaware-based power generation options.

Yingling said Delmarva continues to be concerned that residents and small businesses, which buy 28 percent of Delmarva Power's electricity, will pay for the extra costs of the wind power. Industrial customers would receive the wind power, but not have to pay more for it.

Yingling said Delmarva was not refusing to sign a contract.

"At this point, we have not been asked to sign a contract yet. So it would be premature

to say we weren't willing. We look forward to seeing how the state agencies address these significant issues in this proposal," Yingling said.These issues aren't really addressed in the PPA itself. When Yingling and other Delmarva execs talk about seeking other, out of state, sources of renewable energy, what they really mean is that Delmarva wants to scrap the current negotiations and go shopping for energy on the market, just as the company does now. It's a direct challenge to the authority of the PSC and the other state agencies under the law governing the current negotiations.

The second issue, whether standard offer service (SOS) customers take on the burden (and the benefits) of the wind power, is a more subtle matter. If fossil fuel prices don't rise, SOS customers will pay a little more. But if fossil fuel prices continue to climb, these customers will realize savings for 25 years. The question is whether to spread the costs-and the benefits-to all of Delmarva's customers.

But the heart of the matter is that Delmarva Power doesn't want to do a deal, period, end of sentence. The PPA now before us is a good deal. The time has come for the PSC and other state agencies to exercise their authority under the law and direct Delmarva Power to sign the agreement.