Bankruptcy Court Asserts Sole Authority Over PG&E Power Contracts

SAN FRANCISCO (CN) – A federal judge on Friday scolded a federal regulator for its “power play” to claim jurisdiction over Pacific Gas and Electric’s power supply contracts after the embattled utility declared bankruptcy.

“Without statutory or Supreme Court authority to support its position, [the Federal Energy Regulatory Commission] in fact ‘presumes to sit in judgment’ and second-guess – no overrule – decisions of the bankruptcy court,” U.S. Bankruptcy Judge Dennis Montali wrote in a sharply worded 31-page ruling.

Major energy suppliers, including Nextera Energy, Calpine Corporation and several solar power firms had sided with FERC’s position. They argued the bankruptcy court should not have sole authority over contracts regulated by FERC to ensure they serve the public interest.

Some fear stripping FERC of power over the agreements could also derail California’s clean energy goals. The bankruptcy court could let PG&E alter its contracts with solar energy producers. Last year, the state passed a law setting a goal of relying entirely on zero-emission power sources by the year 2045.

PG&E said it was pleased with the court’s ruling, but that it is not deaf to the concerns of its energy suppliers or other interested parties, including the state government, wildfire victims and creditors.

“PG&E has made no decisions as to whether to assume or reject contracts as part of filing for Chapter 11,” PG&E spokesman James Noonan said by email. “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.”

FERC and attorneys for power suppliers Nextera Energy, Calpine and Consolidated Edison Development did not immediately return requests for comment Friday.

Before PG&E declared bankruptcy on Jan. 29, FERC issued two advisory opinions finding that if PG&E filed for bankruptcy, it would retain concurrent jurisdiction with the bankruptcy court over its power supply contracts. On May 1, FERC denied PG&E’s appeal challenging those decisions.

In his ruling Friday, Montali had a few choice words for FERC’s decisions asserting authority over energy supply contracts that are subject to the court’s jurisdiction.

“To be blunt, they were unauthorized acts of the power regulator executing a power play (to use a hockey term) to curtail the role of the court acting within its authorized and exclusive role in these bankruptcy cases,” Montali wrote.

Montali also rejected FERC’s argument that only a Circuit Court of Appeals can overrule its decisions on concurrent jurisdiction because that is the proper procedure for appealing the regulator’s opinions.

Describing the appellate procedure as “absurdity” and Kafkaesque, Montali insisted the Supreme Court granted him the power as a federal judge to overrule FERC’s decision because the regulator “acted outside of its statutory authority.”

If FERC were to maintain joint jurisdiction over power supply agreements, Montali said it would “render meaningless” the bankruptcy court’s responsibilities in this area of the law.

Forcing PG&E to seek a second, potentially contradictory decision from FERC could also severely delay the Chapter 11 bankruptcy process and “have real and significant impact on the reorganization effort and the millions of Northern Californians adversely affected by it,” Montali wrote.

However, Montali denied PG&E’s motion for a preliminary injunction, finding his declaratory judgment ruling suffices to rescind FERC’s decisions on jurisdiction as unenforceable.

Facing $30 billion or more in liability for sparking a series of deadly California wildfires, PG&E filed for Chapter 11 bankruptcy in January.  Last month, Montali approved PG&E’s request to establish a $105 million wildfire assistance fund, despite complaints that the funding falls short of what’s needed to provide shelter and other basic necessities to all victims.

 

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