Commission rejects appeal to review Bloom Energy deal

DOVER — The state Public Service Commission on Tuesday rejected a petition seeking to review an agreement with Bloom Energy that costs Delmarva Power customers several times more than expected and has failed to create the promised jobs.

The commission unanimously agreed it lacks the authority to alter the contract with Bloom, which the official tasked with representing the interests of consumers called “a horrible deal.”

The petition stems from a 2011 deal that was expected to be an economic boon but ended up falling well short of expectations.

Touted by three officials no longer in office — Gov. Jack Markell, Delaware Economic Development Office Director Alan Levin and Delaware Department of Natural Resources and Environmental Control Secretary Collin O’Mara — the agreement was supposed to create up to 1,500 jobs and provide clean energy.

Bloom, a California-based company, produces solid oxide fuel cells, which convert gas or other biofuels, such as ethanol, to electricity. Bloom says they are both more efficient and better for the environment than regular methods of generating energy from fossil fuels. According to the company, a single cell can power a lightbulb.

Delaware bet big on Bloom, providing $12 million to the company, which began manufacturing the cells on the University of Delaware’s STAR Campus.

At the urging of Gov. Markell’s administration, the General Assembly overwhelmingly passed legislation designating the company’s fuel cells as renewable energy sources, allowing Bloom to collect a surcharge.

That charge, officially known as the Qualified Fuel Cell Provider tariff, was initially supposed to cost Delmarva Power customers about 70 cents per month. The estimate was later revised up to $1.34, although the Caesar Rodney Institute, a right-leaning think tank, predicted it could surpass $4.

Despite high hopes, the promised jobs never materialized, and Bloom was forced to give back $1.5 million last year after it reported creating only 302 jobs. The company has additional targets it must meet by Sept. 30, 2021, and Sept. 30, 2023. Failure to do so would require the company pay back more money to the state.

The Caesar Rodney Institute’s projection turned out to be accurate: The agreement costs the average Delmarva Power customer about $4 to $5 a month. If the situation holds, Delaware taxpayers will end up paying about $700 million to Bloom by the time the surcharge ends in 2033.

Unfortunately for those customers, they’re stuck.

“In fact, the contract is so unique that even the state in the statute said it would not come back. … So, under the statute, it says that the state cannot modify, alter or change unless Bloom is guaranteed all the revenues under the contract,” James Geddes, an attorney representing the Public Service Commission, said. “So, I’m not sure what a review would accomplish. The commission has many matters before it, but there is no viable remedy. The commission, unfortunately, hands are tied.”

Public Advocate Drew Slater, who seeks to achieve low utility rates for Delawareans, said the contract benefits Bloom at the expense of state residents, calling it a warning for hypothetical future agreements.

The petition heard Tuesday was brought by John Nichols, a Delaware resident unhappy with the situation.

“Bloom hasn’t met its obligations, and the question then becomes why and what were the circumstances surrounding the approval of the tariff and what can we learn from it,” he told the commission.

But even if the Public Service Commission had the power to alter or end the contract, doing so would have disastrous results for Delawareans.

Any change would “accelerate the total amount due, so that ratepayers will immediately be on the hook to Bloom for approximately $400 million,” according to a motion from the commission and public advocate.

If that provision is triggered, Delmarva customers would be forced to immediately pay approximately $700 apiece to satisfy the terms of the contract.

Speakers Tuesday agreed the contract is a bad one for the state but leaves officials with no good options. As if the issue needed any more complexity, the authority for the contract originally rested with the Delaware Economic Development Office, which has since been reformed into a new division in the Department of State.

The agreement with Bloom stands as one of the biggest failures by Gov. Markell’s administration and is a point of contention for both Republicans and Democrats. Sen. Dave Lawson, a Marydel Republican who was one of the few lawmakers to vote against the bill that essentially authorized Bloom to come to Delaware, said Tuesday that legislators “were sold a bill of goods.” Rep. John Kowalko, a Newark Democrat, filed a letter of support of Mr. Nichols’ petition with the commission.

Bloom did not immediately respond to a request for comment.

 

Reach staff writer Matt Bittle at mbittle@newszap.com

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