Tuesday, August 25, 2009

The Cost of Doing Business

The New York Times yesterday took a look at PG&E's new deal with Brightsource. What's interesting about the deal is that the rates PG&E will pay will be contingent on Brightsource getting federal loan guarantees from the Energy Department. If not, the company will be looking at much, much higher financing costs, and those costs will be passed through to PG&E through higher rates.

The Division of Ratepayer Advocates couldn't stand the deal and pointed out that Brightsource did a similar deal with Edison that included no contingecy rate increases.

As the Times pointed out, renewable energy deals represent fairly significant credit risks in these still dicey economic times and, absent federal loan guarantees, deals are going to be expensive.