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O’Malley off-shore power proposal runs into headwinds

ANNAPOLIS — The O’Malley administration’s proposal to build off-shore wind turbines to generate electricity faced strong headwinds in the Senate Finance Committee Tuesday.

Senators spent almost 2½ hours grilling administration officials about the annual cost to consumers to finance the project and the plan to force utilities to buy the power through a 25-year contract. In his testimony on the bill, Gov. Martin O’Malley got similar blow-back from delegates at a House hearing March 3.

O’Malley is pushing the plan as a way to generate 3 percent of the state’s energy, part of the legislated goal to have 20 percent of Maryland’s energy produced through renewable methods by 2020. Doing so will put Maryland ahead of the curve on the East Coast, state officials said, and developing the wind turbines here could create jobs in manufacturing, transportation and installation.

A broad array of environmental groups supported the measure at the hearing.

But the senators objected to covering the costs to develop the project with a surcharge on electricity use for residential and business consumers, as well as the overall cost of the project. The Maryland Energy Administration said the surcharge might cost a residence $1.44 a month and the average supermarket $163 a month, but the surcharge wouldn’t appear on bills until the turbines are producing electricity in 2016.

O’Malley officials disputed the Department of Legislative Services estimate that the total project to build the turbines 10 to 12 miles off the Ocean City coast would cost $4.6 billion. They said the estimate was too high, but did not offer their own projected construction costs.

“This bill commits us to a process, not an outcome,” said Abby Hopper, O’Malley’s energy advisor. The Public Service Commission would review the proposals and could reject all of them if the costs are too high.

Even though the wind itself costs nothing, developing power turbines off-shore costs more than twice as much as most other forms of power generation, including land-based wind turbines.

“Why are we asking ratepayers to pay for this?” asked Sen. Catherine Pugh, D-Baltimore City. “They’re screaming and yelling about their bills going up already.”

Said Hopper: “Private money won’t invest in these projects unless there are guarantees.”

Under intense questioning from Sen. Allan Kittleman, R-Howard, PSC Chairman Douglas R.M. Nazarian admitted that “the best long-term bang for the buck is nuclear. … Off-shore wind isn’t getting built on its economic merits.”

Because even off-shore winds are variable, the power from the turbines needs to be backed up by traditional sources of electricity, but Malcolm Woolf, director of the Maryland Energy Administration, said that the off-shore windmills could provide 79 percent of the power needs of the Eastern Shore.

Sen. Delores Kelley, D-Baltimore County, said, “We might be left with a big white elephant if no other states go for this,” and consumers would pay heavily for an unreliable source of power.

Sen. E.J. Pipkin, R-Upper Shore, who continues to back re-regulation of the utility industry, complained that “all the profits go to the people that develop it.” Pipkin said electricity customers foot the development costs, while the revenue stream to the developers is guaranteed by state mandated contracts that force utilities to buy the wind-generated power at higher-than-market prices.

Business organizations such as the Maryland Alliance of Manufacturers and utility companies including Constellation Energy Group and the Southern Maryland Electric Cooperative uniformly opposed the bill.