CORRECTED-(OFFICIAL)-UPDATE 1-NJ picks PSEG/Deepwater

(NJ BPU corrects to say project will produce power at market rates, not 4.3 cents a kilowatt-hour) (Updates with company comment)

NEW YORK, Oct 3 (Reuters) - New Jersey utility regulators picked a joint venture between a Public Service Enterprise Group Inc (PEG.N) subsidiary and Deepwater Wind to develop a $1 billion, 350-megawatt offshore wind farm, the state and companies said Friday.

This is a second win for Deepwater over the last 10 days. Last week, Rhode Island selected Deepwater to develop a $1 billion wind farm off its coast.

Garden State Offshore Energy, the venture, proposed to build 96 wind turbines 16 to 20 miles off the coast of Cape May and Atlantic counties in South Jersey, a distance that should be barely visible from the shore, the companies said.

Both companies have strong financials and can handle a project of this size, a PSEG spokesman said, noting they will likely finance it through a combination of debt and equity without involving ratepayers.

He said the companies expect the project to have three primary revenue streams - the sale of energy into the market; renewable energy credits; and tax benefits, including the federal production tax credit.

Delaware, meanwhile, required the local power company, Pepco Holdings Inc's (POM.N) Delmarva, to enter into a long-term power purchase agreement with Babcock & Brown Ltd's (BNB.AX) Bluewater Wind, the developer of the state's proposed offshore wind farm, taking the cost risk away from the generator and putting it on the ratepayer.

Rhode Island is also looking at having the ratepayer cover at least part of the cost of its project by having National Grid Plc (NG.L), that state's electric company, enter into an agreement to buy power from Deepwater.

NEW JERSEY WIND FARM

The New Jersey project could power about 125,000 homes and generate electricity at market rates, according to the state Board of Public Utilities.

Construction could start in 2010, with the wind farm starting to generate energy in 2012 and the entire project operational in 2013, the venture and state estimated.

New Jersey's energy plan calls for 20 percent of the state's energy come from renewable sources by 2020, a major portion of which is envisioned to be from offshore wind.

The state received five bids on its October 2007 request for proposals to develop an offshore wind farm.

PSEG and Deepwater said they would base their decision to proceed with the project on the receipt of the required federal and state regulatory approvals, analysis of environmental impacts, wind quality studies, energy markets and financing.

To help seal the deal, the venture said it would look for a place to assemble the turbines and a port facility in New Jersey, which would create jobs in the state if the companies find a suitable site. Deepwater made similar promises to establish a manufacturing facility in Rhode Island.

Deepwater was established to develop large offshore wind projects. Major investors include Newton, Massachusetts-based FirstWind, a developer of onshore wind projects in the United States, and New York-based investment firm D.E. Shaw & Co.

PSEG, of Newark, New Jersey, owns and operates more than 16,500 MW of generating capacity, markets energy commodities, and transmits and distributes electricity to 2.1 million customers and natural gas to 1.7 million customers in New Jersey and another 2.9 million customers around the world. (Editing by Christian Wiessner)