New Jersey Board of Public Utilities Rejects Agreement on Offshore Wind Project

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On July 19, 2013, the New Jersey Board of Utilities (the Board) rejected a stipulated agreement that would have allowed New Jersey’s first offshore wind energy project to move forward. The Board’s failure to approve the stipulation is significant because the developer, Fishermen’s Energy, LLC (Fishermen), was able to reach an agreement over costs to ratepayers with the New Jersey Division of Rate Counsel (Rate Counsel), which had been opposed to the project until recently. As a result, Fisherman may now miss a year-end deadline to qualify for state tax credits that are necessary for the project to be economically viable.

Fishermen proposed constructing five wind turbines 2.8 miles off of the Atlantic City Coast at a cost of roughly $200 million (the project). The turbines would generate approximately 25 megawatts of electricity, which could provide energy for an estimated 20,000 customers.

New Jersey’s Offshore Wind Economic Development Act (OWEDA), enacted in 2010, requires that New Jersey offshore wind energy projects provide a net economic benefit to the state. Rate Counsel initially opposed the project over concerns that it would not meet this requirement. Fishermen’s ability to obtain $100 million in federal incentives through Department of Energy grants and other tax incentives that would drive down project-related costs for ratepayers alleviated Rated Counsel’s doubts over the project, leading to the stipulated settlement.

The Board appeared particularly concerned over a provision that would require ratepayers to bear an additional $19.2 million in project costs if Fishermen is unable to obtain all of the federal incentives. Rate Counsel, however, believed that the stipulation provided New Jersey ratepayers with appropriate protections and that the project would provide sufficient benefits to the state. Rate Counsel was satisfied with ratepayer costs and believed that the project would create jobs and increase New Jersey’s production of clean energy.

There has also been concern over the generally elevated costs of wind energy. New Jersey businesses, which are already subject to comparatively high energy prices, are wary of projects that might increase energy costs even further.

The project has already been approved by the U.S. Army Corps of Engineers and the New Jersey Department of Environmental Protection. Once approval from the Board is obtained, Fishermen may move forward and begin construction. Since the Board has rejected the stipulated agreement, Fishermen may try and amend the stipulated agreement (with Rate Counsel) to address the Board’s concerns and resubmit the stipulation for approval. If a satisfactory stipulated agreement is not reached, the Board may begin a formal proceeding to evaluate the project.