Good news on electric rates, no thanks to state government 

Good news. We report this morning that Cape Light Compact (CLC) has announced new electricity supply prices for residential, small commercial, and large industrial customers that are the lowest since 2005.

Bad news. The state of Massachusetts, by its administrative and legislative policies favoring uneconomic wind power generation, is putting sharp upward pressure on electricity costs.

CLC buys its electricity from a New York supplier and ConEdison Solutions.

“Cape Light Compact is working hard to make your electric bills lower, especially in these challenging economic times,” CLC chairman Bob Mahoney said in a press release, reported today by Times writer Janet Hefler. “That’s why we’re thrilled to offer our Cape and Vineyard customers the best basic electricity prices currently available and great long-term options starting in 2011.”

The new basic rate for residential customers is 7.71 cents per kilowatt-hour (kWh) from CLC. That’s a 3.5 percent decrease from 7.99 cents per kWh in the previous six months. The reduced price, in effect from January this year through July, saves 12 percent over basic electricity prices from the same time period a year ago, Ms. Hefler reports.

All this is encouraging, but where Massachusetts’ irrational and poorly developed interest in clean energy from offshore wind farms is concerned, no crippling hike in electricity costs is too high.

For example, Cape Wind has made a deal to sell the electric power, that the planned Nantucket Sound wind farm may one day produce, to National Grid. National Grid agreed to buy half the power Cape Wind creates and, in addition, bought the right to award the other half to a utility such as NSTAR, or another retail supplier, as it chooses. The first half was worth $3 billion to Cape Wind, the second a similar amount. Altogether, the deal will help Cape Wind finance creation of the 130-turbine wind energy plant at Horseshoe Shoals.

National Grid is one of four suppliers that serve Massachusetts customers, including National Grid, NSTAR, Western Massachusetts Electric Co., and Unitil Corp. Notice that CLC is shopping elsewhere. The state requires the four investor-owned utilities to buy a growing percentage of the power they sell from renewable energy providers.

National Grid will pay 20.7 cents a kilowatt-hour for 50 percent of Cape Wind’s energy when it first comes online, perhaps in 2013.

The price will increase by about 3.5 percent a year for 15 years, for about $3 billion in potential revenue for Cape Wind. The price, which includes a state-required renewable energy subsidy of 6.1 cents per kilowatt-hour, is well above the current price of electricity from conventional power sources. To provide basic residential service, National Grid currently pays 8.11 cents per kilowatt-hour for the power alone, not counting distribution or transmission charges, according to the company’s website.

So, end-users will pay a premium for environmentally friendly wind power that amounts to about one-third of the contract costs, according to numbers in a National Grid filing made to the Massachusetts Department of Public Utilities (DPU).

Clean energy makes sense. Wind energy economics mean financial pain for ratepayers.