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Will PG&E's Bankruptcy Hurt California's Ambitious Energy Efficiency Goals?

RACHEL MARTIN, HOST:

Today in California, bankruptcy lawyers start sorting out the future of PG&E, one of the country's biggest utilities. The company filed for Chapter 11 protection this week, faced with potentially billions of dollars in liability over recent wildfires. One of the many big questions is this - will PG&E's troubles end up hurting California's ambitious goals to address climate change? Lauren Sommer of member station KQED and NPR's Energy and Environment team explains.

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LAUREN SOMMER, BYLINE: California governors, over and over, have pushed the state to add more renewable energy to the grid.

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ARNOLD SCHWARZENEGGER: California's spurring clean technology.

JERRY BROWN: There's the overarching threat of a warming climate.

SOMMER: Now the goal is 100 percent clean energy by 2045. But it's actually up to utilities to make it happen.

RALPH CAVANAGH: PG&E's the largest investor in the state of California in energy efficiency, in renewable energy.

SOMMER: Ralph Cavanagh is with the Natural Resources Defense Council, an environmental group. He says California utilities are well on their way to getting a big share of their electricity from renewables like solar and wind.

CAVANAGH: We've made them our essential clean energy partners, and a federal bankruptcy judge has the ability to disrupt that in many ways.

SOMMER: A judge looks at all the money a company owes and decides who gets paid what. And PG&E owes billions of dollars to solar and wind companies who it signed contracts with.

CAVANAGH: Suddenly, those are at risk. That is causing consternation across the renewable energy sector, understandably.

SOMMER: The sticking point for a judge could be the cost. PG&E signed some contracts for solar power more than a decade ago, back when the technology was still pretty expensive. That's changed, says Ethan Zindler, an analyst with Bloomberg New Energy Finance.

ETHAN ZINDLER: The price of renewables has dropped really dramatically since when they signed these contracts.

SOMMER: A judge may not honor those original high prices.

ZINDLER: It could undermine confidence in California as a clean energy market going forward.

SOMMER: Already, some renewable energy projects that sell to PG&E have had their credit ratings downgraded.

ZINDLER: It's not necessarily life or death for them instantly, but it's not good news for them.

SOMMER: So some companies are taking matters into their own hands.

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JOHN KETCHUM: Good morning, everyone, and thank you for joining our fourth-quarter and full-year 2018...

SOMMER: Last week, John Ketchum, CFO of NextEra Energy, sought to assure investors that its renewable energy contracts with PG&E would not affect the bottom line.

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KETCHUM: Even if all of that cash is trapped, we expect to be able to meet our financial expectations.

SOMMER: But the company also went on the offensive.

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KETCHUM: Obviously, we are not going to sit on our heels. We're going to pursue all avenues.

SOMMER: It asked federal regulators to get involved. And on Friday, the Federal Energy Regulatory Commission ruled that it needs to review any changes to those renewable energy deals.

CATHERINE SANDOVAL: This has been a tussle that has already been playing out in bankruptcy courts all over the nation.

SOMMER: Catherine Sandoval is a law professor at Santa Clara University. She says a big jurisdictional fight is probably on the way between the bankruptcy judge and federal regulators. California will have its own case to make to defend its renewable energy goals, she says, something like this.

SANDOVAL: Wait, Judge. We have, in California, adopted a number of laws regarding environmental protection, and the bankruptcy law gives you no authority to displace that.

SOMMER: If California loses that argument, it's hard to see how it would reach its ambitious climate change goals without help from the state's biggest utility. For NPR News, I'm Lauren Sommer in San Francisco. Transcript provided by NPR, Copyright NPR.