THE SENATE’S top budget official is calling for Avangrid to be banned from bidding on any future projects in the state if it terminates its current offshore wind contract.
Avangrid agreed to the terms of a 20-year power purchase agreement last year and just before it won final regulatory approval the company stepped forward to say the economy had shifted and it needed more money to make the contract to build Commonwealth Wind work. The Department of Public Utilities rejected that bid, and the company subsequently shifted gears and said it wanted to terminate the existing contract and bid in the state’s next procurement.
In a comment posted Friday to a state website soliciting comments about the next offshore wind procurement, Sen. Michael Rodrigues of Westport, the chair of the Senate Ways and Means Committee, said Avangrid shouldn’t be allowed to simply pay a penalty and move on.
“I firmly believe that any company that non-performs on an existing contract should be deemed disqualified and be barred from bidding on any future projects in the state,” Rodrigues wrote. “When companies do not act in good faith, they should be stricken from future bids, plain and simple.”
Rodrigues said to let Avangrid pay a penalty ranging from $24 to $48 million to get out of its current contract and move on to the next procurement would set a terrible precedent given that nearly all construction work in the state is facing similar challenges because of the war in Ukraine, rising interest rates, inflation, and supply chain difficulties.
“What do we tell our school building contractors if we let Avangrid do this – it’s alright if you’re the flavor of the day?” Rodrigues asked.
The hardline stance, if adopted by the Healey administration, has the potential to undermine the state’s climate change strategy, which hinges on shifting the New England power grid away from reliance on fossil fuels and moving toward wind and hydro-electric power.
Not only is Avangrid the leading offshore wind developer in the state (it also is part owner of Vineyard Wind, which is on track to open later this year), it is also a key player in the state’s bid to import hydro-electricity from Canada, building the transmission line carrying the power into New England.
Other wind farm developers are facing similar cost pressures. Orsted, one of the world’s leading offshore wind developers and the owner of a lease area off the Massachusetts coast, is threatening to walk away from a wind farm project off the coast of the United Kingdom, according to press reports.
One of the state’s other major wind farm developers, Southcoast Wind (formerly Mayflower Wind), has indicated it is facing the same cost pressures as Avangrid. Southcoast, however, has stopped short of saying it will terminate its existing contract.
Rodrigues refused to get into hypotheticals about what Southcoast Wind will do. He said the company has committed to him that it intends to honor its contract. “I have no reason to doubt that,” the senator said.
Rodrigues’s stance could also have a major impact on a project within his district. The Prysmian Group, as part of Avangrid’s Commonwealth Wind project, has pledged to build a subsea cable manufacturing plant at Brayton Point in Somerset. If Avangrid is barred from participating in future contracts, Prysmian’s project could also be affected.
Rebecca Tepper, Gov. Maura Healey’s energy and environmental affairs secretary, sent a letter to Avangrid on February 27 raising concerns about Avangrid’s insistence on terminating the existing contract.
“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,” she wrote.” 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.”
Tepper stopped short of threatening to ban the company from future projects. She did say, however, that the company could be penalized in bidding on future procurements.
“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.
Tepper’s spokeswoman issued a statement on Monday saying the Healey administration welcomes comments on the procurement process. “As we move forward with our next procurement, we will look for cost-effective, viable projects that will help the Commonwealth achieve its climate goals and provide customers with the benefits they are contracting for,” she said.
Other lawmakers have said Avangrid shouldn’t be allowed to just walk away from its contract without paying some sort of penalty, but they haven’t suggested the company should be banned from bidding on other projects.
The Legislature’s two energy experts — Sen. Michael Barrett of Lexington and Rep. Jeffrey Roy of Franklin, the chairs of the Telecommunications, Utilities, and Energy Committee – said in an interview for CommonWealth’s Codcast on January 6 that the state needs to walk a fine line between penalizing wind farm developers that terminate their existing contracts but not penalizing the state itself by barring them from future procurements.
“We don’t need companies making promises they can’t keep, but we do need to get robust renewable energy,” Roy said. “I’m all for moving forward and working with these companies so we can do that and achieve our goal.”
Avangrid declined comment, other than to point to its response last week to the letter from the Healey administration. The company said it believes “the path forward to deliver Commonwealth Wind is in the termination of the current contracts and moving forward in the next offshore wind procurement.”
Rodrigues may be just playing a bad cop on Beacon Hill as the negotiations continue with Avangrid, and leaving the good cop routine to others.
Rodrigues acknowledged the cost pressures on wind developers are real and said he has no plans to weigh in on the contract dispute by filing legislation. He said he doesn’t envy the Healey administration’s delicate position in dealing with Avangrid.
“They‘re stuck between a rock and a hard place,” he said. “I’m glad I’m not in that seat.”