The Arbitrator's Report

Lawarence Hamermesh, a professor at Widner Law School, was appointed to mediate the negotiations between Delmarva Power and Bluewater Wind. His role was upgraded to arbitrator last month.
Professor Hamermesh's report on the negotiations reveals just how active he has been as arbitrator. It specifies the disagreements between the parties, describes which issues he chose to arbitrate and identifies one important point that would require action by the General Assembly.
We have known that Delmarva continues to balk at the Power Purchase Agreement (PPA). Now we know the sticking points. For instance the proposed pricing and the overall output of 300 MWh are Bluewater's proposal, and have not been accepted by Delmarva.
Even more fundamental is Delmarva's refusal to accept the length of the PPA, 25 years. The company buys power year to year and has not accepted the basic premise of a long term PPA to provide price stability. The term and the pricing are the two most important issues in the negotiations.
Professor Hamermesh writes of the surreal argument over the treatment of an obscure accounting standard, FIN 46:

FIN 46 (Section 12.4)
6. The most divisive and time-consuming issue in the negotiations was the treatment of a risk that, by all accounts, is extremely unlikely to arise. That risk involves the possibility that the assets and liabilities associated with the Project will, at some indeterminate point in the future, be required to be consolidated on Delmarva’s financial statements under FASB Interpretation No. 46, or “FIN 46”. The particular risk addressed by the parties that might bring about this consolidation is the possibility of amendments to FIN 46.
7. Neither of the parties contends that such financial consolidation would be required under current accounting rules. Notably, confirmation of that proposition is a condition precedent to the effectiveness of the December 10 PPA (Section 5.1(a)(iii)). Likewise, both parties seem to acknowledge that even if pertinent accounting rules did change in a manner that would otherwise call for consolidation of the Project on Delmarva’s financial statements, it is most likely that the original accounting treatment of the Project and the December 10 PPA would be “grandfathered,” in which case such original treatment would continue to apply. I therefore believe that it would be most unfortunate if the disposition of an issue as speculatively problematic as the treatment of a FIN 46 consolidation event contributed in any material way to the Agencies’ overall approval or disapproval of the December 10 PPA.
8. Because it perceives that the adverse effects of consolidation would be severe, however, Delmarva has vigorously asserted that it should be absolutely protected from FIN 46 consolidation risk. In particular, it has sought the absolute right to terminate the PPA if a FIN 46 consolidation were required, and could not be cured promptly by Bluewater. On the other hand, Bluewater has expressed grave concern that an event not of its own making (an accounting rules change) could permit Delmarva to abandon the PPA, leaving Bluewater unable to recoup its substantial investment in the Project without any protection under the terms of the PPA.

After considering the pitfalls and potential remedies, Hamermesh offered this proposal on how to handle the issue:

12. Accordingly, the only solution I considered fair and appropriate was one in which an independent assessment of appropriate measures would be made if and when a FIN 46 consolidation were actually threatened, and the potential effects of such a consolidation and measures that might avoid it could be evaluated in a concrete context. Section 12.4 thus establishes a process in which, following notice of a threatened FIN 46 consolidation, an independent evaluator would initially recommend potential means to remedy the circumstances creating the FIN 46 determination. The independent evaluator would give preference to remedies that would avoid consolidation pursuant to FIN 46, avoid termination of the PPA, and, to the extent practicable, minimize adverse impacts – including impairment of the benefits of the PPA – on the parties and on Delmarva’s customers.

The issue of whether to spread the cost (and the benefits) to all of Delmarva's customers, not just SOS (Standard Service Offer) customers cannot be resolved in the negotiations. Since the original bill (EURCSA) specifies SOS customers, only the General Assembly can change the customer base that would be served by the wind farm. Delmarva is insisting that the General Assembly act on this change before the PPA's effective date.
Professor Hamermesh continues with discussion of some other points of contention. Overall, his report points out the considerable disagreement and technical issues that need to be resolved in order for the PPA can be executed. It seems clear to me that the negotiations would not have progressed this far without his taking an active hand.