PG&E Wins Ruling Allowing it to Pull Out of Power Contracts -- Update
08 Juni 2019 - 03:38PM
Dow Jones News
By Peg Brickley
PG&E Corp. scored a victory in a clash with the Federal
Energy Regulatory Commission over who has the right to rule on
whether it can rip up $42 billion in power-purchase agreements.
Judge Dennis Montali said he was willing to issue an injunction
barring the regulator from preventing the troubled Californian
utility company from unwinding contracts that bind it to buy power
from suppliers, including renewable energy producers. A judge of
the U.S. Bankruptcy Court in San Francisco, Mr. Montali is
presiding over PG&E's chapter 11 proceeding.
PG&E said it was pleased with Friday's ruling, but
appreciates concern that its bankruptcy will slow progress toward
promoting clean energy and power from sources such as wind and
solar, as California deals with a changing climate. The company
said it has yet to decide which contracts it will keep and which it
will reject.
Bankruptcy gives PG&E the freedom to get out of power deals
that it considers unfavorable, as long as a judge agrees. FERC, the
federal agency that regulates interstate power markets, has
asserted it also has authority over PG&E's contract
decisions.
According to Mr. Montali, FERC overstepped its jurisdiction in
threatening to overrule his decisions if PG&E decides to rip up
some of the power purchase agreements.
The federal agency said it shared authority with the bankruptcy
court over the company's contract decisions. Judge Montali
disagreed, dealing a blow to NextEra Energy LP and other companies,
many of them producers of wind and solar energy, with contracts to
sell power to PG&E. They wanted the bankruptcy judge to agree
to side-by-side jurisdiction with FERC, which would have made it
tougher for PG&E to walk away from the deals.
NextEra Energy couldn't immediately be reached Saturday to
comment on the decision. An appeal is likely and Judge Montali has
said he would sign orders allowing speedy review of his decision by
a higher court.
PG&E resorted to bankruptcy to try to resolve an estimated
$30 billion in damages from wildfires linked to its equipment. The
ability to rework its contracts under the protection of a
bankruptcy judge gives the company added financial flexibility,
while threatening the business of smaller alternative energy
producers.
Judge Montali's decision has no immediate impact, as PG&E
has yet to move to reject any of its power contracts. However, it
signals that the public interest component of any decision on
PG&E's contracts will take a back seat to what is best for the
company, unless the defenders of a contract can make a strong
case.
Even before the ruling, uncertainty about the future of their
contracts with PG&E saw some green-energy producers downgraded
to junk status. FERC's authority to hold the line on contracts in a
troubled industry is a major issue for companies that are weighing
restructuring alternatives.
Write to Peg Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
June 08, 2019 09:23 ET (13:23 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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