Guest essay by Larry Hamlin

Pacific Gas & Electric has won a huge legal decision from the bankruptcy court agreeing with its position that in can proceed to renegotiate $42 billion dollars in costly energy power purchase contract commitments including many renewable energy contracts.

This decision will likely be appealed but for the time being the $42 billion dollars in power purchase energy contracts with suppliers including renewable energy projects with NextEra Energy Inc., Consolidated Edison Inc. and Berkshire Hathaway Inc. are under challenge and could be subject to complex and lengthy renegotiations as a part of PG&E’s bankruptcy proceedings which not only might delay these planned renewable contracts but could also significantly jeopardize California’s future renewable energy use time table.

The Wall Street Journal noted the following regarding how this ruling came about and its significance concerning PG&E’s future renewable energy contracts.

“The ruling by Judge Dennis Montali, who is presiding over PG&E’s chapter 11 proceeding, may allow the company to get out of $42 billion in power-purchase agreements, including many pioneering wind and solar deals that are now well above current market prices.”

“PG&E said it was pleased with Friday’s ruling, but appreciates concern that its bankruptcy will slow progress toward promoting clean energy. 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. But the Federal Energy Regulatory Commission, which regulates interstate power markets, has asserted it also has authority over PG&E’s contract decisions.

In his ruling late Friday, Judge Montali disagreed, finding that FERC overstepped its authority in threatening to overrule his decisions on PG&E’s power-purchase agreements. FERC had sought to have the bankruptcy judge agree to side-by-side jurisdiction, which would have made it tougher for PG&E to get out of deals.

PG&E has $34.5 billion worth of renewable-energy contracts for electricity deliveries between now and 2043, according to a filing with FERC. Rejecting those with above-market prices could save the company $1.4 billion annually, according to Moody’s Investors Service.”

A recent study by the Texas Public Policy Foundation has exposed how the federal renewable energy Production Tax Credit (PTC) schemes cost the U. S. government billions of dollars in revenue subsidies with those benefits provided to a small number of large energy companies which own and operate renewable energy projects.

The study noted the following regarding the huge financial impact to U.S. tax payers regarding this climate alarmist driven subsidy scheme falsely pushing unnecessary demands to increase use of costly and unreliable renewable energy:

“The federal production tax credit (PTC) for wind energy producers has cost the U.S. government billions of dollars in revenues, distorted energy markets, and benefited just a few large corporations, a new study reports.

The federal government imposed the PTC in 1992 in an effort to promote renewable energy. The PTC, currently 1.9 cents per kilowatt hour for the first 10 years of a wind farm’s operations, has been extended several times by Congress. It is scheduled to begin phasing out at the end of 2019. The PTC and tax depreciation allowances cover more than 50 percent of the capital costs of a typical wind facility.”

“The biggest recipient of PTC largesse is NextEra Energy, the nation’s largest wind power producer, with approximately 10,000 wind turbines and annual revenues of $17.5 billion, reports the study by TPPF Senior Fellow Angela Erickson. More than $5.7 billion in taxpayer dollars flowed to NextEra Energy courtesy of the PTC between 2007 and 2016, making NextEra “one of the most subsidized Fortune 500 companies,” writes Erickson.”

“Over the decades, the PTC has caused market distortions, including instances of “negative pricing,” where producers operate wind turbines when the electricity they provide is not needed, simply to receive PTC revenue.

“The PTC’s $24 per megawatt-hour credit sometimes results in wind energy producers paying electricity suppliers to take their energy rather than turning off wind turbines during surplus energy hours (e.g., early mornings when people are sleeping),” the study states. “By keeping wind turbines running, producers will receive the tax credit even though the grid does not need the energy. The resulting low prices may harm the reliability of the grid by reducing the incentives for investing in energies that can supply baseline generation.”

“With the PTC set to be phased out by the end of 2019, companies are in an aggressive race to erect as many wind turbines as possible across the nation. Corporations that start construction of wind facilities before December 31, 2019 will continue to receive PTC tax credit payments until December 2029.

As a result, “the federal government will transfer at least an additional $48 billion in PTC subsidies to owners or financiers of commercial wind farms,” through 2029, Erickson reports.”

NextEra Energy Inc. which had pushed FERC to intervene in the PG&E bankruptcy proceeding along with other renewable energy companies impacted by this ruling could experience significant revenue impacts to their businesses as a consequence of the lost PTC subsidies.   

The PG&E bankruptcy situation regarding these PTC renewable energy contracts is providing unwanted visibility exposing the huge multibillion dollar subsidy benefits being provided to large companies building costly and unreliable renewable energy projects which impose huge financial tax burdens upon the public while degrading the reliability, stability and cost effectiveness of the country’s electric system.