After the Department of the Interior signed the Cape Wind project lease last month, National Grid moved to purchase half of Cape Wind's future electricity. Why did the company decide to put such a big stake in the Massachusetts wind farm? During today's OnPoint, Tom King, president of National Grid, discusses the future of Cape Wind and renewable energy in Massachusetts. He also talks about his company's carbon reduction and efficiency goals.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Tom King, president of National Grid. Tom, thanks for coming on the show.
Tom King: Thank you for having me. Glad to be here.
Monica Trauzzi: Tom, Interior Secretary Salazar recently signed the Cape Wind Project lease and National Grid has signed a multibillion-dollar power deal to buy half of Cape Wind's future electricity. It's costly energy. Why was this a good business decision for National Grid?
Tom King: Well, ultimately it is about creating the future. We have to, as a nation, continue to move forward and become a much cleaner energy mix within the United States. So, this effort is really to introduce hundreds of megawatts of clean energy technology right into our marketplace. We're very pleased to do it and, economically, it, roughly on the average bill, adds about $1.25 to the bill and it really is $1.25 well spent to create a clean environment in the future.
Monica Trauzzi: Can't you get cheaper renewable energy though, not from Cape Wind, but from elsewhere?
Tom King: We always look at all types of sources and this is a large-scale renewable wind project that really is a leadership. It's a forefront of what tomorrow is going to look like. So the opportunity for us was to do this contract and support this project and we're going to continue to do others, so we'll have the opportunity to bring in many type of renewable resources into the portfolio over years to come.
Monica Trauzzi: There's some controversy in Massachusetts relating to the cost of all of this to consumers. It sounds like residents in western and central Massachusetts might get hit a little harder with higher energy costs than those on the cape in Cape Cod itself. Is that true and is it fair for those customers?
Tom King: Well, ultimately the customers that are impacted by this are National Grid customers. So by us stepping in and entering into this contract it really just affects those customers that are part of the National Grid service area. Therefore, we're not serving the Cape and, therefore, the customers that we're serving are the ones that will be paying about $1.25 a month more in their energy bill. But they're going to be getting three, three-and-a-half percent of their energy bill is going to be from renewable resources.
Monica Trauzzi: And what about your customers in the other surrounding states? Are they impacted?
Tom King: This is just a Massachusetts contract, so it just impacts our Massachusetts customers.
Monica Trauzzi: OK, talking about natural gas, there's some news there in terms of pricing and you've asked state regulators in Massachusetts to approve a 14 percent drop in the supply price of natural gas. Why the dramatic drop?
Tom King: Well, it's really reflective of the market. We contract on a term basis, whether it be a year, two years, three years, and then we go in and adjust rates based on what the overall procurement requirements were. So what that is doing is reflecting current prices in today's market.
Monica Trauzzi: So, switching gears to New York State, National Grid has faced some heat recently. Some folks have alleged that there's been mismanagement of funds within the company and you are now asking the government in New York to OK a price increase for customers. There's some allegations that you're making customers pay for the mismanagement of funds at your company. What's your response to that?
Tom King: Our customers will not be paying for those costs. These were costs that were incurred on behalf of the company and they should have not been in the rate proposal that we submitted. Therefore, we've removed them and we're not asking for customers to have any cost associated with those expenses. And those expenses were the wrong expenses to include in the rate case. That's why we removed them and there will be no customer impact.
Monica Trauzzi: Are prices going up in New York state?
Tom King: Our proposal that we put in front of the commission, even different from this expense issue, which we've removed, is that there is no change in the delivery rate.
Monica Trauzzi: Your company has carbon reduction goals. Do you still need to see the government put forward a national carbon reduction plan?
Tom King: The need for the national carbon reduction plan is to ensure that the U.S. is beginning to show up globally as a leader to manage the environment and the emissions associated with electric generation or any other industry. So, we think it's required just to show global leadership from a U.S. standpoint.
Monica Trauzzi: So, what's your take then on the state of the climate discussion right now in Washington? Things are at a standstill. Obviously, things didn't move in the Senate this summer. Where do you see things going in the short term?
Tom King: I think things in the short term will continue to sit where they are as we go through this leadership change that will be impacted by the November 2 elections. So, as a company, we're going to continue to advocate that this is an important issue, it's a global issue, and the U.S. should be showing leadership.
Monica Trauzzi: Aside from cap and trade, where is the U.S. falling short in terms of energy policy?
Tom King: It's falling short from a global competitive basis standpoint. Whether it's China, India, the U.S. is basically sitting on its hands and not advancing in clean technology and renewables and tomorrow's energy infrastructure. And we will not be able to compete globally unless we take action. So we need action.
Monica Trauzzi: National Grid is a big proponent of energy efficiency. How is that a guaranteed part of your company's business? How does your company guarantee that efficiency will happen?
Tom King: Ultimately, efficiency is about consuming energy in the most efficient manner possible, so we are fully behind efficiency. It's in our DNA. We've been doing it for 20 years and we're going to double and triple our efforts and it's going to be something you'll see from National Grid for decades to come.
Monica Trauzzi: What about the consumer? I mean one of the biggest challenges in terms of energy efficiency is getting customers on board. So what kind of education is happening there with your customers?
Tom King: We're constantly educating our customers and engaging in that dialogue and our customers are telling us and showing us by the action they're taking they want help with energy efficiency. We have a 3 percent less campaign and it's been fully embraced by our customers and that investment is happening and we will spend record levels this year on delivering energy efficiency.
Monica Trauzzi: OK, we're going to end it there. Thank you for coming on the show.
Tom King: Great, thank you Monica.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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