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House provision would allow renegotiation of hydro contracts

It’s unclear how much more Mass. ratepayers will have to pay

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A SPENDING BILL coming up for action in the Massachusetts House contains a provision that would allow the terms of a massive 2019 contract for hydropower from Quebec to be renegotiated to cover cost increases associated with construction delays. 

The provision, scheduled for a vote on Thursday, authorizes the state’s utilities to sit down with the project’s developers — Hydro-Quebec and Avangrid — and negotiate contract changes that will allow the project to move forward after a long fight in Maine over a 130-mile transmission line carrying hydroelectricity from the Quebec border to Lewiston, Maine.

House officials said the project is set to proceed after years of legal and political maneuvering in Maine. In November 2021, 59 percent of the state’s voters approved a law blocking the project. Construction on the transmission line halted after the vote, but the project gained new life in August 2022 after the Maine Supreme Judicial Court ruled the ballot question approved by voters was unconstitutional. Despite the court ruling, construction of the transmission line has not resumed.

“The transmission contracts must be amended in order for the project to remain viable and help the Commonwealth reach its 2030 climate goals,” House officials said. “In cooperation with the Maura Healey administration, this legislation provides the Department of Public Utilities with the flexibility to approve amended contracts, while also providing protections so that ratepayers are not impacted by any cost overruns that are not associated with the construction delay.”

In practical terms, the legislation would allow the three Massachusetts utilities to renegotiate the terms of a 20-year power purchase agreement with Hydro-Quebec, the provincial utility supplying the electricity, and Avangrid, the company building the transmission line.

State officials in 2019 said the 20-year hydroelectricity deal would supply about 17 percent of the state’s power at an average price of 5.9 cents per kilowatt hour. The power was originally slated to start flowing at the end of 2022.

It’s unclear how much more money will be needed from Massachusetts ratepayers to get the project back on track. Officials with Hydro-Quebec and Avangrid had no immediate comment.

Massachusetts is facing a somewhat similar situation with its contracts for offshore wind. Avangrid and a joint venture of Shell and Ocean Winds signed contracts with the state’s utilities last year to provide the state with electricity from offshore wind farms off the coast of Martha’s Vineyard. Months after the contracts were signed, both developers said the economic climate had changed. They said rising interest rates, inflation, supply chain problems, and the war in Ukraine had altered the economic environment so dramatically that their projects could no longer be financed under the current contract terms.

The developers asked the Department of Public Utilities to reopen the contracts and revise the terms, but the DPU refused. The companies are now seeking to terminate the contracts, which would trigger financial penalties, and rebid them in a new offshore wind procurement scheduled for next year.

Offshore wind developers in other states are facing similar economic challenges. In most cases, they are asking regulators to allow the contract terms to be tweaked or renegotiated.

Eversource, one of the major utilities in Massachusetts, has said it couldn’t renegotiate the terms of the offshore wind contracts because “there is no process by which a DPU-approved contract can be amended following approval” and because those contracts had to comply with a price cap required under state law.

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About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

As the House vote scheduled on the hydroelectricity contract shows, a DPU-approved contract can apparently be amended if the Legislature passes a law allowing that to happen.

Pedro Azagra, the CEO of Avangrid, told financial analysts in February that the company needed price relief on both its hydroelectric and offshore wind projects if they were to move forward.

Although some lawmakers have suggested the company should be penalized for trying to back out of its offshore wind contracts, the state is in a tough position – it desperately needs the renewable energy to meet its climate goals.