Back-channel talks on Commonwealth Wind
Healey, utilities said to be open to ‘contract modifications’
THE HEALEY ADMINISTRATION has been working behind the scenes to get the Avangrid wind farm project back on track, but so far little progress has been made.
Avangrid last year secured a power purchase agreement for Commonwealth Wind with the state’s three utilities and agreed to terms, but then claimed interest rate hikes, inflation, the Russia-Ukraine war, and supply chain difficulties made it impossible to complete the project without some price relief.
With no price relief forthcoming and economic conditions continuing to deteriorate, the company shifted course, seeking to terminate the project and start over from scratch with the state’s next offshore wind procurement. It’s unclear, however, how Avangrid walks away from a contract it agreed to.
A letter sent Monday to Avangrid CEO Pedro Azagra by Rebecca Tepper, the secretary of energy and environmental affairs, indicates the Healey administration tried to broker some agreement on the contract terms and is frustrated with the lack of progress.The letter also indicates the state’s three utilities were willing to negotiate with Avangrid.
The utilities and Healey, when she was attorney general last year and Tepper was one of her top aides, opposed modifying the contracts in filings with the state Department of Public Utilities, which ultimately approved them.
“The Healey-Driscoll Administration requested that Avangrid and the electric distribution companies discuss options, including contract modifications, to maintain project viability and keep advancing this key offshore wind project,” the letter from Tepper to Azagra said. “While the electric distribution companies have signaled an openness to collaborate, Avangrid made clear that it views contract termination as the only financially viable outcome, without identifying any opportunities for governmental assistance to improve financial viability.”
Tepper, in her letter, said recent statements by Azagra on a call with investment analysts “intentionally or unintentionally misrepresent the status of those contracts in a matter that is material.”
Tepper acknowledged the economic challenges the wind farm is facing, but said her options to address the situation are limited.
“As we are still in the infancy of what will be a major industry in the Commonwealth, I am committed to establishing procurement processes that do not reward developers for backing out of their commitments. The impact that tactic could have on ratepayers is one of the many concerns that will drive our design of the procurement process as I seek to ensure robust competition and fairness,” she wrote.
She also warned that Avangrid could be penalized if it succeeds in terminating its existing contract and participates in the next wind farm procurement. “During bid evaluation, the Department of Energy Resources will identify proposals that are viable and cost-effective. The experience of the bidder will be evaluated in the selection process,” Tepper wrote.
In a statement, Avangrid didn’t alter its stance. “We are working with all stakeholders to find private and public solutions to the global price increases outside of our control, and believe the best path forward to deliver Commonwealth Wind is in the termination of the current contracts and moving forward in the next offshore wind procurement,” the statement said.