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Utilities agree to let Commonwealth Wind out of contracts for $48 million

The turbines of the Block Island Wind Farm off the coast of Rhode Island. (Jesse Costa/WBUR)
The turbines of the Block Island Wind Farm off the coast of Rhode Island. (Jesse Costa/WBUR)

Commonwealth Wind made a breakthrough in its long-running effort to back out of its offshore wind contracts.

The developer behind the 1,200-megawatt project and a trio of Massachusetts utility companies struck a deal in which Commonwealth Wind will pay roughly $48 million to dissolve previous agreements the parties signed for the proposed clean wind energy.

If the move wins approval from state regulators as at least one top lawmaker expects, it would effectively wipe away the largest offshore wind development in the state's pipeline and clear the way for the project's developer, Avangrid, to re-bid the project in hopes of securing a higher price amid what it has described as changing economic currents.

Avangrid agreed to pay $25.9 million to Eversource, $21.6 million to National Grid and $480,000 to Unitil to scrap power purchase agreements it reached last year with the utilities, according to documents the parties filed with the Department of Public Utilities on Thursday.

Those payments would be credited to each utility's customers, according to a letter summarizing the accord. The deal also calls on Commonwealth Wind to back down from a court challenge it filed against a DPU ruling in December last year that effectively rejected the developer's effort to back out of the contracts.

Commonwealth Magazine first reported on Monday about the agreement between the developer and utilities.

Spokespeople for Avangrid and the DPU declined to comment Tuesday.

The companies asked for DPU to approve the termination of power purchase agreements within 30 days, but the department does not face a formal deadline.

Rep. Jeff Roy, the House's point person on clean energy, said the state will now move forward with a "clean slate" in the fourth round of bidding for offshore wind projects, which will unfold in the coming months.

"I think the payment [Commonwealth Wind] are going to make is the maximum penalty that the contracts allow, and the fact that they're paying every cent of the maximum amount is sufficient to close this loop and move forward with round four," Roy said in an interview.

Utility executives working with the Baker administration picked Commonwealth Wind in 2021 in the state's third round of solicitation for more offshore wind power.

Since last fall, Avangrid has been arguing that changing economic circumstances including supply chain upheaval and the Russian invasion of Ukraine rendered the project impossible to finance under previously agreed-to terms.

The company hopes that by scrapping its power purchase agreements with utilities, it can submit a new proposal in the upcoming solicitation round and win selection again at a more favorable price.

It's a risky move because, depending on how many bids come in from a relatively small pool of competitors, the state could pick other projects and drop Commonwealth Wind entirely. On the flip side, policymakers are under pressure to lock in clean energy development in Massachusetts as they work to achieve the statutory target of net-zero emissions by 2050, and they might not feel there is much of a choice.

Massachusetts intends to secure 5,600 megawatts of offshore wind energy by 2027 under its clean energy law. Through the first three rounds of procurement, the state approved projects adding up to 3,200 MW, though the elimination of Commonwealth Wind takes 1,200 MW off the board.

"Even with this setback, we are confident that a robust offshore wind industry is taking root off the coast of Massachusetts," Maria Hardiman, a spokesperson for the Executive Office of Energy and Environmental Affairs, said Tuesday. "In May, we were proud to announce the largest offshore wind procurement in New England history, and we are committed to working with business leaders, communities, labor, and other leaders as we move forward."

Another developer, SouthCoast Wind, has also signaled it wants to back out of its combined 1,200 MW contracts due to similar financial concerns, which would further slash the amount of capacity already in the Massachusetts pipeline.

The Healey administration in May set its sights on procuring as much as 3,600 MW of wind energy capacity in the upcoming round.

Under the draft request for proposals, developers would newly gain the opportunity to submit bids with an "alternative indexed pricing proposal" to account for changing economic factors.

The DPU is still reviewing the RFP which would accept bids until Jan. 31, 2024. DOER expects to publish more information about the indexed pricing idea in the fall, according to an official.

This article was originally published on July 19, 2023.



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