Bloom critic petitions state to review fuel cell surcharge, today topping $200 million

The News Journal | by Karl Baker

As Delaware’s fuel cell surcharge for Bloom Energy ticked past $200 million this month, a longtime critic formally challenged the validity of the deal the company reached with lawmakers eight years ago.

John Nichols, of Middletown, is petitioning utility regulators to review Delaware’s decision to impose a fuel cell tariff on Delmarva Power electricity bills – money the utility uses to purchase electricity from Bloom Energy.

He claims it has placed a “burden” on homes and businesses.

The surcharge, which acts as a subsidy for the heavily-indebted company, is calculated based upon the market price of renewable energy credits and the regional cost of surplus electricity. The lower those prices fall, the higher the surcharge becomes for Delmarva Power customers in Delaware.

While a 2011 study estimated the average monthly charge for a household would peak at about $3.50 in 2017, it has surpassed $6 in past months.

The October charge will be about $4.79, according to the Delaware Public Service Commission.

In 2011, the General Assembly approved the surcharge for 21 years, as part of a larger incentive package to entice Bloom Energy to build a facility in Delaware.

Lawmakers also changed the law to make it possible for Delmarva to satisfy some of its state renewable power purchase requirements using Bloom’s fuel cells, even though they run on natural gas.

The vote occurred as unemployment had surged nationally in the wake of the Great Recession, and locally after Newark’s manufacturing sector had been ravaged with the loss of thousands of jobs following the closure of two auto plants.

The package ultimately convinced the California company to build its East Coast production facility in Newark. At the time of the deal, Bloom Energy pledged that by 2017 it would employ 900 people in Delaware.

In the years since, the tariff has provided the company with a predictable revenue stream – one that, to date, has charged more than $200 million on Delmarva Power electricity bills – even as Bloom did not meet its hiring promise.

During the past year, its Delaware workforce has hovered around 300. The company has reported that its total salaries to Delaware workers has not fallen as short of its goals, as last year it reached about 60 percent of what was promised.

Nichols argues that the Bloom tariff has become too expensive for too small of an environmental benefit, while claiming it has not provided promised economic development or innovation.

He wants energy regulators at the PSC to consider “options to mitigate this burden.” Asked what that should be, he said it was up to the commission to decide.

Rep. John Kowalko, D-Newark, says he sent a letter of support for Nichols’ petition to the PSC and intends to file as an intervener in the case. The liberal Democrat supports mitigating the tariff, he said, even while he disagrees with stances about fossil fuels that he says has been taken by the more conservative Nichols.

Kowalko called his decision in favor of the 2011 Bloom deal his “most regrettable vote” he ever cast.

“Right off the bat, I should have just said ‘no,’” he said. “The governor said to me, ‘are you going to turn your back on the possibility of 900 jobs?”

Then-Gov. Jack Markell, a chief advocate for the deal, had courted Bloom to come to Delaware.

Nichols’ petition will be discussed at an Oct. 9 meeting of the Delaware Public Service Commission.

“He wants us to re-evaluate this tariff and whether Bloom is fulfilling the requirements,” PSC spokesman Matt Hartigan said. “It’s on the agenda in two weeks. At that point the commission will evaluate whether that has merit or not.”

PSC officials have told Nichols in the past that any issue with the tariff should be resolved by the General Assembly “and not in an executive agency,” Hartigan said.

The PSC regulates public utilities in Delaware, with a board of five governor-appointed commissioners. The board approves rates and attempts to guarantee that utility companies have an opportunity to earn a reasonable profit.

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