DPU rejects wind developer’s bid for contract relief

Denies 1-month delay, delivers ultimatum on wind farm

DEALING A POTENTIALLY major setback to the state’s emerging offshore wind industry, the Department of Public Utilities rejected a request by Avangrid to delay action on a power purchase contract for its 1,200-megawatt wind farm to allow time for the company to renegotiate the price.

The ruling leaves the project very much in doubt because Avangrid insists the war in Ukraine, inflation, supply chain issues, and rising interest rates have made it impossible to finance the Commonwealth Wind wind farm at the contracted electricity price.

Mayflower Wind, which is also building a major wind farm off the coast of Massachusetts, has not been as forceful in its pleas for price relief, but it supported Avangrid’s motion for delay and has also indicated it may be unable to proceed without a reopening of its contract.

The Commonwealth Wind and Mayflower projects, which were due to come online in 2028, represent the bulk of offshore wind in development off the Massachusetts coast, and any lengthy delays in getting them approved would make it more difficult for Massachusetts to meet its 2030 climate change and emission goals.

Vineyard Wind, the nation’s first industrial-scale wind farm, currently remains on schedule to begin generating some power at the end of next year. Avangrid owns half of the Vineyard Wind project.

The DPU order focused on Avangrid’s October 20 request for a one-month delay in taking action on the Commonwealth Wind contract, but it indicated the wind power developers should either abide by the existing contract terms or withdraw from the proceedings and take their chances in trying to renegotiate their contracts with the state’s utilities – Eversource, National Grid, and Unitil. The utilities had refused to renegotiate the contracts.

The order faulted the company for waiting until the last minute to raise concerns about its power purchase agreement, which was filed with the DPU on May 25. The DPU order, signed by commissioners Matthew Nelson, Robert Hayden, and Cecile Fraser, said reviewing new information now would be akin to starting the process over from scratch.

“A renegotiation of material terms of the power purchase agreements, such as the price, would delay the department’s decision by several months, not several weeks,” the order said. “In effect, the parties to the power purchase agreements would be starting over, and as such there is no delay avoided or efficiency gained by granting a stay as opposed to the companies withdrawing their petitions and submitting renegotiated power purchase agreements, if any, at a future date.”

At times in their order, the commissioners seemed peeved. “The department has expended precious resources over the last several months investigating power purchase agreements that, according to Commonwealth Wind, no longer facilitate financing for the project,” the commissioners said. “Whatever its reasons, Commonwealth Wind waited until after the filing of initial briefs [on October 20] in these proceedings to come forward. Of course, a party will be held to the predictable consequences of its strategic choices, regardless of outcome.”

In their decision, the commissioners also referred to their heavy workload. “The department is therefore obligated to ensure that our review of the proposed power purchase agreements is done in an administratively efficient manner and avoid the unnecessary use of resources that could be dedicated to other important matters pending before the department,” the commissioners said. “Accordingly, Commonwealth Wind and Mayflower Wind must now decide whether they intend to move forward with their contractual obligations under the power purchase agreements or file a request to dismiss the proceedings. The department directs Commonwealth Wind and Mayflower Wind to notify the department and the [utility] companies of their election within three business days of this order.”

The decision was dated Friday. Avangrid officials said they first became aware of it Friday night.

Craig Gilvarg, a spokesman for Avangrid, issued a statement saying the company appreciated the DPU’s prompt attention to the issue and indicated it would present a proposal to “return the project to economic viability” in the coming days to the administration of Gov. Charlie Baker, Attorney General Maura Healey, regulatory officials, and Eversource, National Grid, and Unitil.

 “Avangrid is confident that its Commonwealth Wind project is at least half the cost of today’s fossil fuel electric prices,” Gilvarg said in the statement.

On the CommonWealth Codcast, which was recorded on Friday, Ken Kimmell, Avangrid’s vice president for offshore wind development, said the company would only need a “very modest increase” in its price to get the project back on track.

He indicated the price could be renegotiated very quickly and starting over from scratch would waste precious time the state needs to meet its greenhouse gas emission targets for 2030.

Rep. Patricia Haddad, whose hometown of Somerset wants to become a hub for the offshore wind industry, also appeared on the Codcast and described the price situation as a “bump in the road” for offshore wind. She joined Kimmell in criticizing the state’s utilities for balking at the need to reopen the contract and renegotiate the price.

“There’s no way we could have anticipated any of these hurdles or any of these bumps in the road,” she said. “I, too, am disappointed with the utilities because instead of saying no, I would want them to say ‘how can we get over this little hurdle.’”

William Hinkle, a spokesman for Eversource, issued a statement that stayed away from the controversy. “This contract was filed with the department as part of our responsibility to procure the energy supply needed to help the Commonwealth achieve its clean energy goals while providing our customers with safe, reliable service. We remain prepared to move forward once all necessary approvals are received,” he said.