Utilities tax would build revenue for offshore wind investment

File The proposed Vineyard Wind project beat two other companies for an 800-megawatt wind farm off the coast of Martha's Vineyard.

Write a Comment

By State House News Service

House leaders are hoping to bring their offshore wind policy legislation to the floor for a vote "sooner rather than later," Rep. Jeff Roy said Wednesday as he detailed the ways in which the bill will seek to change how Massachusetts procures offshore wind energy and will boost support for the emerging industry here.

"I think we have come up with an ambitious approach," Roy, House chairman of the Committee on Telecommunications, Utilities and Energy said Wednesday just before a committee poll on the bill and about a dozen others was to close. He added, "Hopefully we'll get it to the House floor sooner rather than later. And I think this has been a major priority of Speaker [Ron] Mariano and I think it's something that he wants to do as soon as possible and I think he certainly recognizes the urgency of getting this legislation in place so that we can bring ourselves back as the leader in offshore wind."

Broadly, the bill redrafted in the TUE Committee would soften the state's price cap without scrapping it in every circumstance, would impose more than $45 million a year in new charges on electric and gas customers to generate revenue for an offshore wind investment fund, would give legislative leaders a chance to appoint two of five seats on a new project selection committee charged specifically with maximizing economic development, would establish a slate of tax credits and incentives for offshore wind companies, and would launch a pilot program to connect high schools with offshore wind industry training opportunities.

It incorporates parts of seven bills, including the one (H 4204) that Gov. Charlie Baker filed and testified in support of Tuesday. There is a lot of overlap on the general aims of the governor's bill and the House bill, but also many differences in the details.

"If you like what you saw in 4204, you're going to love what you see in the committee's bill," Roy said Tuesday.

At the heart of the legislation is an expanded role for the Massachusetts Clean Energy Center to "serve as a focal point and provide statewide coordination for offshore wind initiatives," Roy said.

"There are a lot of players in this space and a lot of coalitions and groups that are out there, but we think it's important to have one coordinating entity that oversees all of this development of the industry and we think MassCEC is particularly well suited to do that," he said.

Given the greater power MassCEC would have, the House bill would reshape the MassCEC board from a 12-person board to a 14-board, reduce the number of seats appointed by the governor from five to three, and require the House speaker and Senate president each to appoint two people to the board.

"It's a quasi-governmental entity. We want to increase the independence of that board. The current makeup of it is heavily weighted in favor of the governor and we think by putting these additional picks in, it'll make it a true quasi-governmental entity," Roy said.

Part of MassCEC's expanded role would be to administer a new Massachusetts Offshore Wind Industry Investment Fund called for in the bill. Roy said the idea for the fund was modeled on the way Massachusetts has supported the life sciences industry over the last 15 years. The offshore wind investment fund would be seeded with the $90 million in American Rescue Plan Act money that the Legislature has approved for marine port infrastructure investments.

To generate recurring revenue for the fund, the House bill proposes to triple an existing per kilowatt-hour charge on electric customers and to add a new charge on natural gas customers.

About 30 cents of the average electric customer's monthly bill already goes towards renewable energy initiatives and the increase proposed in the House bill would raise that average amount to 90 cents per month with the additional 60 cents earmarked specifically for the bill's new offshore wind investment fund.

The average electric customer would pay an additional $7.20 per year if the House plan is adopted, based on data from the U.S. Energy Information Administration. The new charge is projected to generate about $23 million a year for the fund, Roy said.

The average natural gas customer would see an additional 81 cents added to each monthly bill for a yearly total of $9.73 as a result of the new charge on natural gas customers included in the House bill, based on EIA data. The new gas charge, all of which would be directed to the investment fund, would generate another roughly $23 million a year, Roy said.

"So a steady stream going into MassCEC and since we're going to really count on them to be the anchor for the wind industry, we thought it was important to get a funding stream," he said.

The idea of increasing the renewable energy charge on electric customers and adding a new charge to gas customers appears to have originated in a bill (H 3294) filed by Rep. Carolyn Dykema to create a more sustainable revenue source for MassCEC.

In a report that Roy's office put together to help guide the drafting of the new legislation, researchers noted that "[w]e have heard concerns about increasing charges for electric customers, and have been urged to consider a rate base increase to the gas side rather than electric. With decreased fossil fuel usage, that could propose a problem in the future."

Roy's office identified as an alternative source of revenue an idea Rep. Dylan Fernandes proposed (H 3302) to require offshore wind proposals to allocate at least 1 percent of total project costs to a MassCEC-administered fund that would support Massachusetts-based offshore wind power research and workforce development.

When it comes to the state's price cap requiring that each new offshore wind contract carry a cheaper price than the one before it, the House bill would not eliminate it entirely but would change when and how it applies.

If a single company or its affiliates were to submit a bid or bids that are more expensive than the previous procurement, the proposals could be rejected as uncompetitive under the House language. But if two companies or more submit bids above the cap, neither could be rejected outright as uncompetitive.

"The price is always a part of the conversation. We're taking the rigidity away and allowing it to be a factor like all the other factors in play," Roy said. "So it gives us a real opportunity to get value and that's the whole object of this. In the long run, what better serves the commonwealth of Massachusetts and the ratepayers? So that's the goal of what we did with the rate cap."

Addressing the state's price cap has already shaped up to be one of the main points of contention as the Legislature gives greater consideration to tweaking offshore wind policy. Sen. Michael Barrett, who co-chairs the Committee on Telecommunications, Utilities and Energy with Roy, has been skeptical of lifting it and this week asked Baker to give up on his push to eliminate it.

Where Baker's bill sought to turn the responsibility of evaluating and selecting winning bids to the Department of Energy Resources, Roy's bill proposes to establish a new selection team made up of the secretary of energy and environmental affairs, the secretary of housing and economic development, the independent evaluator who has been part of the state's previous procurements, one person appointed by the House speaker and one person appointed by the Senate president.

The House speaker and Senate president will not be allowed to appoint to the selection committee any member of the Legislature, Roy said.

That new selection committee would be required to produce a numerical economic development score used in evaluating and ranking offshore wind bids and the House bill would add a requirement that the long-term contracts for wind power be both cost-effective and "maximize economic development."

The next stop for the bill, possibly as soon as Thursday morning, will be the House Ways and Means Committee. After that panel reviews it and makes any changes, the bill could be brought before the House for debate and a vote. The Senate is likely to propose its own framework for a restructured offshore wind procurement process, either by amending the House bill or drafting its own.

Energy and climate policy has been one of the issues under intense negotiation right up until the end of formal sessions in each of the last three legislative sessions and the 2021-22 session could be the fourth in a row to conclude with an update to offshore wind policy in Massachusetts.