The cost of a 145-mile power line to bring hydroelectricity from Canada to Massachusetts via western Maine has risen by roughly 50 percent, to $1.5 billion, in the wake of a Maine ballot measure that delayed work for more than a year — and Massachusetts ratepayers could end up paying much of the tab.
Avangrid chief executive Pedro Azagra disclosed the updated cost of the New England Clean Energy Connect project during a quarterly earnings presentation on Thursday. Avangrid has contracts with three Massachusetts electric utilities to build the line, a deal it won in 2018 for $950 million in tandem with power-plant owner Hydro-Quebec. But Avangrid halted construction after Maine voters rejected the project in a November 2021 referendum. Avangrid sued to overturn the vote and eventually won that court battle; in April, a Maine jury agreed with Avangrid that it had “vested rights” in the project that could not be taken away by voters because the company had already spent hundreds of millions of dollars.
Since then, Avangrid has done little, if any, work on the line.
In recent weeks, the company approached Governor Maura Healey’s administration, saying the delay prompted big cost increases. As a result, both the House and the Senate inserted language into their respective supplemental budget bills that would allow Avangrid to recover cost overruns by passing them on to utilities and, ultimately, ratepayers if authorized by the Massachusetts Department of Public Utilities. The differences in the two spending bills now must be reconciled by House and Senate negotiators.
Supporters in the Healey administration and Legislature say the measure is essential to complete the power line, which would carry the equivalent of 1,200 megawatts of electricity — enough for about 1 million homes — from dams run by Hydro-Quebec into Massachusetts. The project is seen as crucial in helping Massachusetts meet its aggressive goals to reduce carbon emissions. However, many Maine residents objected, saying the line would cut through natural areas, essentially acting as a giant extension cord from Quebec. About one-third of the line will cut across woodlands while the rest will run along existing transmission lines.
Many major infrastructure projects, including a separate offshore wind project proposed by Avangrid, experienced significant cost increases last year due to rapid interest rate hikes, the Ukraine war, and other supply chain issues. Despite the $500 million-plus cost increase for the Maine project, hydropower is so efficient that state officials still expect Massachusetts ratepayers to save money over time, compared with electricity rates in the current New England market that are heavily influenced by the price of natural gas. Avangrid and the utilities still need to negotiate any contract changes and then get DPU approval, those officials said, leaving the ultimate impact to ratepayers here unclear.
“Completion of the NECEC line is important for Massachusetts customers,” Elizabeth Mahony, the Healey administration’s energy resources commissioner, said in a statement. “This project will help stabilize our electric rates, provide clean, reliable winter energy supply, and reduce the state’s emissions. We appreciate efforts by the House and Senate to remove barriers to this critical clean energy project and look forward to construction resuming this summer.”
Representative Jeff Roy, co-chairman of the Legislature’s energy and telecom committee, said he believed the extra money Avangrid is seeking would reduce the savings expected from the additional hydropower, from savings of $2.64 a month to roughly $2 a month for a typical Massachusetts household. But approving the legislation, he said, will allow the stalled project to start again.
“What we’re facing was the prospect that they would not be able to move forward because of the cost increase,” Roy said. “By providing this language, we’re able to give the DPU the flexibility to amend the contract[s].”
Construction could resume as soon as next week. Azagra told investors on Thursday that the company will work on “critical path activities” at a substation in Lewiston, Maine, essentially the new line’s southern point, starting on Aug. 3.
Roy said it’s possible Avangrid may sue the financial backers of the Maine referendum, a group of power plant owners led by NextEra that can stand to lose business because Hydro-Quebec offers cheaper electricity than they do.
“They have not yet filed a lawsuit but I would expect them to mitigate the damage as much as possible and not put it all on the backs of ratepayers,” Roy said. He added that the DPU would only allow costs from referendum-related delays to be passed on to consumers.
Meanwhile, Senator Mike Barrett, the other co-chairman of the energy committee, said he remains hopeful that Massachusetts ratepayers “won’t be the only parties on the hook for delays caused by Maine voters” and that other New England states might be interested in buying some of this clean power, particularly given the growing commitment to regional cooperation on energy issues.
Still, Barrett concedes it’s an unfortunate extra burden for Massachusetts.
“It was NIMBYism on a grand scale,” Barrett said of the Maine vote. “Massachusetts ratepayers are going to have to pay for the irresponsibility of their Maine neighbors. That is unavoidable and true. I don’t know how else you get the line built. Avangrid will not go forward if they are saddled with a huge loss, and neither will the utilities.”
Avangrid has been involved in a parallel situation involving a proposed offshore wind farm. In that case, the company was not successful in its efforts to renegotiate state-sanctioned contracts to build the Commonwealth Wind project, south of Martha’s Vineyard. Avangrid won the rights to the contracts in late 2021, but later said supply chain issues, interest rate hikes, and the war in Ukraine led to unforeseen cost increases. The utilities — Eversource, National Grid, and Unitil — rebuffed Avangrid’s efforts to renegotiate those contracts. Eventually, Avangrid agreed to pay $48 million to exit those contracts and rebid, presumably at a higher price, for new contracts to be awarded next year. The developers of another offshore wind farm, SouthCoast Wind, are expected to follow a similar path.
Roy and Barrett pointed to differences between the NECEC and Commonwealth Wind scenarios. Construction was well under way on NECEC when Maine voters stopped it, and thus is many years closer to delivering clean energy to Massachusetts than Commonwealth Wind. Another key difference: Hydropower is typically much less expensive than offshore wind.
“It’s clean, renewable, and it’s cheap,” Roy said. “I’m supporting any clean energy we can get, as long as we can get it at a reasonable price.”