(Bloomberg) -- PG&E Corp., the California utility giant that went bankrupt in January amid crippling wildfire liabilities, has reached a deal with some of its power suppliers that would cut the prices it pays for their electricity.
San Francisco-based PG&E is asking a bankruptcy judge to clear deals with Canadian Solar Inc. unit Recurrent Energy and two energy-storage providers to trim contract prices by at least 10%, saving the utility about $20 million, according to a court filing. PG&E is also asking state regulators to approve the changes.
The move may foreshadow what's to come as PG&E's bankruptcy throws the fate of $42 billion worth of long-term electricity contracts -- along with California's environmental ambitions -- into question. The prospect of the contracts getting killed has already rattled the power industry, which relies on long-term agreements to attract financing.
Judge Dennis Montali, who is overseeing PG&E's Chapter 11 case, ruled in June that the bankruptcy court has sole determination over the agreements, thwarting an attempt by power generators to give the Federal Energy Regulatory Commission a say.
“The most important aspect here is the negotiation rather than the outright rejection of the power contracts,” said Andy DeVries, a utilities analyst with CreditSights Inc. “The agreement could indicate how PG&E plans to deal with its other power contracts going forward.”
PG&E fell 0.4% to close at $18.05 on Thursday. Canadian Solar rose 4.3% to $22.23.
Recurrent and the battery storage companies -- Micronoc Inc. and EsVolta LP -- had asked PG&E to renegotiate their contracts to reduce uncertainty and eliminate financing risks, the utility said.
A 10% price reduction “isn't much of a haircut,” Bloomberg Intelligence utilities analyst Kit Konolige said. A lot of contract holders must be “breathing a little easier now,” he said.
--With assistance from David R. Baker.
To contact the reporters on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net;Allison McNeely in New York at amcneely@bloomberg.net
To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Reg Gale
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