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PG&E, First Solar agree on possible contract cancellation

Pacific Gas and Electric Co. and First Solar Inc. have agreed to allow the cancellation of a 15-year power purchase agreement underpinning the 75-MW Willow Springs Solar 3 project in Kern County, Calif., according to an Aug. 6 filing with the U.S. Bankruptcy Court for the Northern District of California in San Francisco.

Judge Dennis Montali, who is presiding over the utility's Chapter 11 restructuring with its parent company, PG&E Corp., must still approve a stipulation between the two companies outlining conditions of termination.

If approved, the agreement would allow, but not direct, Willow Springs 3 LLC, a wholly owned project development subsidiary of First Solar, to cancel the deal. The developer would need to provide notice of cancellation within 30 days of approval. Neither party would be entitled to claim damages related to the cancellation of the contract.

Pacific Gas and Electric, or PG&E, originally signed the contract in 2018 with a start date of February 2021. In February, First Solar flagged risks associated with the power purchase agreement.

PG&E's request for an order approving its mutual agreement with First Solar came days after the utility asked Montali to approve renegotiated contracts for five solar and energy storage projects. The reworked power purchase agreements and resource adequacy contracts would save PG&E an estimated roughly $20 million.

As part of its restructuring, the utility is reviewing $42 billion in commitments with 350 counterparties holding 387 power purchase agreements for 13,668 MW. More than half of that capacity is renewable energy.