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NEW YORK, Nov 8 (Reuters) - Bluewater Wind wants to keep negotiating with Delaware to secure a power purchase agreement that will allow the wind power developer to build a 450-megawatt offshore wind farm.
The state Public Service Commission staff released a report on Bluewater's Delaware Offshore Wind Park that recommended against the project as currently proposed due to the potential high cost to power customers.
The proposed 150-turbine, 450-megawatt wind farm would provide enough energy for as many as 100,000 homes. The turbines would be located 11 miles offshore.
In its report last month, the PSC staff found the project could cost more than $1 billion over Bluewater's initial bid due in part to price escalators tied to possible increases in commodities and currency exchange rates, among other things.
Bluewater, a subsidiary of Australian investment firm Babcock & Brown Ltd BNB.AX, currently estimates the project would cost about $1.6 billion.
Officials at Bluewater and the state PSC were not immediately available for comment.
In a filing with the PSC this week, Bluewater said it does not expect the high cost scenario described in the staff report to occur and wants to work with the staff and other state agencies to resolve the cost concern.
The Delaware Legislature in 2006 directed the local power company, Delmarva, to contract with new power resources to guarantee stable prices for power following a rate increase of over 50 percent due to a rise in power supply costs.
Delmarva, a subsidiary of Pepco Holdings Inc POM.N, issued a request for proposals in November 2006.
Bluewater submitted two proposals and the state in May 2007 ordered Delmarva to negotiate with Bluewater on a power purchase agreement.
Since Delmarva would ultimately pass on the cost of the power purchase agreement to customers, the PSC needs to make sure the contract is in the best interests of ratepayers.
Bluewater has said it could start generating some power at the wind farm as soon as the third quarter of 2011 if the state approves of the (Reporting by Scott DiSavino; Editing by John Picinich)