Author:  Published: June 11, 2019 Dive Brief

Dive Brief:

  • A bankruptcy judge ruled the Federal Energy Regulatory Commission does not have “concurrent jurisdiction” over Pacific Gas & Electric’s power contracts, possibly clearing the way for the utility to have above-market power purchase agreements (PPAs) discharged in its Chapter 11 proceeding.
  • Judge Dennis Montali on June 7 said FERC “has chosen to interfere with bankruptcy courts’ decisions,” and called out the commission for “undermining the function of the bankruptcy court.”
  • NextEra Energy, which has subsidiaries selling renewable power to PG&E, asked FERC​ in January to stop the utility from amending or rejecting PPAs in bankruptcy court. PG&E responded by asking the court to block the commission from issuing rulings that would impact rejection of the contracts.

Dive Insight:

PG&E still has not made a decision regarding PPAs and whether it will seek to have them discharged, but also says it appreciates stakeholder concerns regarding the impact its bankruptcy filing could have on California’s clean energy progress.

“As we assess our contracts, the input provided by the bankruptcy court, policy makers, regulators and relevant stakeholders will be critical to helping form a solution that provides for the reliable and safe delivery of natural gas and electric service for the long-term in an environment that continues to be challenged by climate change,” the company said in a statement to Utility Dive.

Officials at NextEra Energy had no comment.

In a May 1 order, FERC affirmed its jurisdiction over contracts by saying “wholesale power contracts are not simple run-of-the-mill contracts between two private parties, rather, these contracts, while privately negotiated, implicate the public’s interest in the orderly production of plentiful supplies of electricity at just and reasonable rates.”

The commission also said it “neither presumes to sit in judgment of rejection motions nor seeks to arrogate the role of adjudicating bankruptcy proceedings​.”

Montali was blunt in his June 7 order, and pointed to both of those statements.

“FERC’s decision was not only unauthorized, but has and continues to have the effect of undermining the function of the bankruptcy court in its role of ensuring that the goals and purposes of bankruptcy law and policy are properly served and properly executed,” he wrote. “Despite FERC’s lip service to what it describes as ‘concurrent jurisdiction’ to carry out differing and perhaps competing policies, the effect of its decision guts and renders meaningless the bankruptcy court’s responsibilities in this area of the law.”

“The court declares FERC’s decision announcing its concurrent jurisdiction unenforceable in bankruptcy and of no force and effect on the parties before it,” Montali concluded. “If necessary in the future it will enjoin FERC from perpetuating its attempt to exercise power it wholly lacks.”

FERC does not comment on pending litigation.