Two manufacturers challenge Rhode Island's approval of PPA between Deepwater Wind, National Grid in state Supreme Court, claim rise in power costs will hurt business; developers say costs will be made up over time

PROVIDENCE, Rhode Island , May 12, 2011 () – An attorney for two manufacturers argued before Rhode Island's highest court Wednesday that the court should overturn approval of an agreement between a wind farm developer and an electrical utility because it would harm state commerce.

But a lawyer for the developers said the upfront costs would be made up over time and the project would become a boon for the state.

The power purchase agreement between Deepwater Wind LLC and National Grid, Rhode Island's primary electrical utility, is a key step in the construction of a wind farm off the coast. The wind farm is a pilot project involving eight turbines connected by a transmission cable to the mainland.

The state's Public Utilities Commission, a three-member quasi-judicial panel, approved the agreement last year. But Toray Plastics Inc. and Polytop Corp., which use large amounts of electricity, are challenging the detail because the rise in power costs would hurt their business and, they say, other businesses and homeowners in the state.

The Rhode Island Supreme Court, which also began its summer recess Wednesday, is expected to rule later this year.

Michael McElroy, an attorney representing Toray and Polytop, told the court that the terms of the agreement do not meet the requirements laid out in state law authorizing the wind farm's construction, one of which requires the project to be "commercially reasonable."

The wind farm is estimated to cost Rhode Island $370 million because wind energy is currently more expensive than traditional energy sources, and projections place the value of economic benefits derived from the wind farm at $129 million. The project will create six permanent jobs, as well as a number of temporary construction jobs.

McElroy said it will cost an additional $40 million to $50 million to construct a cable to ferry power generated by the offshore windmills to Rhode Island's power grid.

"To create six permanent jobs at a cost of $400 million -- is that commercially reasonable? I don't think so," McElroy told the five assembled justices.

An attorney representing Deepwater Wind and National Grid, Gerald Petros, called the project a loss leader.

"The state will not benefit in the short term. But the state will benefit enormously in the long term by doing this first," Petros said.

The project will help the state develop early expertise that position Rhode Island companies to share in "billions of dollars in revenue" by contracting with other states in the region looking to build offshore wind farms, he said.

He also noted the health and environmental benefits of a renewable energy source, like wind, had to be considered.

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