State Pier partners should share in added costs
The public-private partnership to redevelop State Pier in New London needs rebalancing. As things now stand there is plenty of public - meaning taxpayer - investment but it is a light on the private side.
Now the ambitious undertaking, which will convert the pier into a heavy-lift facility that can provide staging, assembly, and delivery services for offshore wind development, faces another price hike. Gov. Ned Lamont should ask the state’s private partners in the project, Orsted and Eversource, to help bring this project to completion by sharing in whatever additional costs remain.
Lamont seems disinclined to pick up the phone and try. Worse yet, when asked by one of our reporters about the matter at a press event, he seemed surprised at the suggestion that the cost is rising yet again.
“I haven’t heard about any additional cost changes, but our ears are alert,” said the governor.
Clearly, those ears are not as alert as they need to be.
We admit that Lamont does not have much to work with if he seeks to tweak the deal. He holds a lousy playing hand. And Lamont’s administration and the Connecticut Port Authority dealt themselves those lousy cards — face up.
But try the governor must.
Three years ago, in negotiating for a project that had already seen price hikes, Connecticut and its wind-power partners reached a deal to share project costs, then estimated at $157 million, roughly 50-50.
Yet Connecticut took on the risk of all future cost increases, while the Orsted-Eversource share was fixed.
The projected costs now stand at $255.5 million, with the state on the hook for about $180 million. The Connecticut Port Authority and its executive director, Ulysses Hammond, have signaled that the price tag will go up yet again, but the authority is not saying by how much. It needs to come clean.
Undertaking this work as a public-private partnership made sense. It will remain a state facility when completed, making it a state project. Yet the scope is far more ambitious, and costly, than would be necessary if Connecticut were simply upgrading its port, rather than building a facility to support such a challenging technological undertaking as offshore wind. That is why significant private investment, from the companies that will benefit, was in order.
You can hardly blame the Orsted-Eversource partners for seeking to limit their exposure to overruns, given that they do not control construction. Massive public infrastructure undertakings are notorious for going over budget — see Boston’s Big Dig for an extreme example. But the state should have demanded more by requiring their private partners to have some skin in the game if costs continued to escalate.
Now the best the Lamont administration can do is seek an accommodation from Orsted, a Danish multinational power company, and Eversource, a New England energy company, to provide some significant share of these latest cost increases. The governor’s best argument would be that completion of the project could face delays given the controversy, and political opposition, yet another cost increase will generate. Being able to announce that the private partners are kicking in would help Lamont navigate those headwinds.
We would also add that it would be the fair thing to do, for whatever that is worth. These companies expect to benefit mightily from investing in offshore wind and they are taking advantage of federal tax credits intended to encourage expansion of renewable energy.
In May about 60% of State Pier is scheduled to switch from construction site to operations, ready for the arrival of vessels working on Orsted and Eversource’s South Fork Wind project, under development off Long Island. But the good news that operations have begun could well be overshadowed by the ever-rising costs.
Reducing dependence on fossil fuels by developing offshore wind fields is a vital component in the effort to mitigate climate change. It will have the added benefit of providing economic growth and creating good-paying jobs. But seeing the state and port authority botch New London’s part in this endeavor has been a source of ongoing frustration. Holding a press conference to announce the private partners are helping complete the project would ease that frustration at least a little bit.
The Day editorial board meets regularly with political, business and community leaders and convenes weekly to formulate editorial viewpoints. It is composed of President and Publisher Timothy Dwyer, Executive Editor Izaskun E. Larrañeta, staff writer Erica Moser, retired executive editor Tim Cotter and retired deputy managing editor Lisa McGinley. However, only the publisher and editorial page editor are responsible for developing the editorial opinions. The board operates independently from the Day newsroom.