Avangrid agrees to pay $48m to terminate offshore wind deal

AVANGRID AND THE STATE’S three major utilities on Monday agreed to terminate a power purchase agreement they signed just last year, with the offshore wind developer agreeing to pay a total of $48 million to put the contract for Commonwealth Wind behind it.

The $48 million termination payment will be paid in three installments to the utilities — $25,900,800 to Eversource, $21,619,200 to National Grid, and $480,000 to Unitil – and the money will be reimbursed to ratepayers, according to filings with the Department of Public Utilities, which approved the power purchase agreement at the end of last year and must now approve the termination agreement.

Shell and Ocean Winds North America, the developers behind SouthCoast Wind, are expected to reach a similar agreement with the utilities, but their termination payment is expected to be higher — in the $60 million range.

The deals will allow the offshore wind developers, who claimed the war in Ukraine, rising interest rates, inflation, and supply chain disruptions made it impossible to finance their projects without pricing adjustments, to move on from those deals and rebid the projects at higher prices in the state’s next procurement in 2024.

The utilities had earlier rejected attempts to amend the contracts and some lawmakers insisted the wind farm developers should stand by the deals they signed or be barred from bidding on future contracts. But the state’s desperate need for renewable energy made such a hard-nosed stance nearly impossible and forced the Healey administration to accept a write-off of the earlier contracts and move on.

As part of the termination agreement, Avangrid also agreed to drop a legal challenge to the DPU’s approval of the power purchase agreement.

Officials at Avangrid declined comment Monday night.

Rep. Jeffrey Roy of Franklin, the House chair of the Legislature’s Telecommunications, Utilities, and Energy Committee, said the outcome was what nearly everyone wanted. “Everyone was in alignment that let’s get these terminated and proceed to Round 4,” said Roy.

Roy said the negotiations over the termination payments were not easy. “They were difficult because [the utilities and the offshore wind developers] were reading the contracts differently. The utilities wanted a bit more,” he said.

Roy predicted on The Codcast a month ago that the Avangrid contract would be terminated and at the exact payment level announced in a filing dated July 13 but posted on the Department of Public Utilities website on Monday. The utilities asked the DPU to approve the termination agreement within 30 days.

“This Amendment and Termination Agreement is not intended to be and shall not be construed as an admission by either Party of any liability, including whether an event of default has occurred with respect to either Party,” the agreement states.

The agreement also makes it nearly impossible for a legal challenge to the termination agreement in the future. “If either Party should subsequently discover that any fact relied upon by it in entering into this Amendment and Termination Agreement was untrue, or that any fact was concealed from it, or that its understanding of the facts below is incorrect, such Party shall not be entitled to any relief in connection therewith, including without limitation on the generality of the foregoing, any alleged right or claim to set aside or rescind this Amendment and Termination Agreement. This Amendment and Termination Agreement is intended to be and is final and binding, regardless of any claims of misrepresentation, concealment of fact, or mistake of law or fact,” the agreement states.

Separately, lawmakers on Beacon Hill are moving to amend the contracts the state’s utilities signed with Avangrid and Hydro-Quebec in 2019 to deliver a massive amount of hydro-electricity into the New England power grid. That hydro project was delayed by several years of legal maneuvering and the passage by voters of a law that would have retroactively shut down the construction of the transmission line through Maine. That law was subsequently overturned by the Maine Supreme Judicial Court as unconstitutional, and the project is expected to resume construction soon. Avangrid is expected to seek higher compensation from Massachusetts utility ratepayers due to the extended legal wrangling in Maine.