The way a AVR worksis to switch between different taps on the transformer to boost or buck the incoming AC mains to provide a nearly constant output voltage (gross oversimplification, but for this purpose it should suffice). Quite useful in areas where the line voltage is not constant nor consistent.
What I understand from what you posted, it seems two relays have gone bad effectively shorting tap(s). Their going open, generally, should not cause any problem - but it is dependant on the circuit.
Checking which relays have gone bad and replacing them should solve the issue.
There might yet be another cause, the drive for the relay coil - either the drive transistor or the microcontroller pin (I am assuming there is a microcontroller inside) have gone released the magic smoke and have caused the relay to permanently latch.