(Reuters) - U.S. offshore wind farm developer Cape Wind said on Monday that Massachusetts utility regulators approved a 15-year power purchase agreement with power company NSTAR to buy Cape Wind's energy, capacity and renewable energy credits.
NSTAR is a unit of New England power company Northeast Utilities.
The NSTAR purchase agreement approved by the Massachusetts Department of Public Utilities (DPU) covers 27.5 percent of Cape Wind's power, Cape Wind said in a release.
Cape Wind plans to build a 420-megawatt (MW) wind farm in federal water off Cape Cod. The long-awaited project has been in development since 2001. Energy experts have said it will cost about $2.5 billion.
Several developers are working to become the first U.S. offshore wind farm, including Cape Wind and privately held Deepwater Wind off Rhode Island.
"This decision helps secure the position of Massachusetts as the U.S. leader in offshore wind power, launching a new industry that will create jobs, increase energy independence and promote a cleaner and healthier environment," Cape Wind President Jim Gordon said in a statement.
In December 2011, the Massachusetts Supreme Judicial Court unanimously upheld the DPU's approval of Cape Wind's agreement with National Grid for 50 percent of Cape Wind's power.
"Taken together, these two PPAs provide Cape Wind with the critical mass to continue securing project financing," said Theodore Roosevelt IV, a managing director of Barclays, the project's financial adviser.
Cape Wind has said it expects to start construction of the wind farm in 2013 with some of the turbines in service in 2015.
NStar will pay 18.7 cents per kilowatt-hour for Cape Wind power in the first year of the contract, a spokesman said. The price can rise 3.5 percent each year under the agreement.
(Reporting by Scott DiSavino in New York, additional reporting by Eileen O'Grady in Houston; Editing by Gary Hill and Phil Berlowitz)