California regulators on Thursday approved a high-priced solar-power contract between PG&E Corp. (PCG) and Abengoa S.A. (ABG.MC) over consumer advocates' objections.

Under the contract, PG&E's utility will buy electricity from a solar-power plant for which Abengoa obtained a $1.2 billion government loan guarantee.

Consumer advocates complained about the high price that PG&E agreed to pay compared to other, lower-priced renewable energy projects. But four of the five members of the California Public Utilities Commission voted to approve the contract, saying that the plant, called Mojave Solar, would be a reliable and unique source of renewable energy.

"The technology is tried and true, the financing is all wrapped up with the U.S. Department of Energy loan guarantee, and we're told that the hard hats are on and the bulldozers are ready to roll," said CPUC Commissioner Mark Ferron.

The decision comes as plunging prices for solar panels and an oversupply of panels from China has put pressure on other renewable energy technologies to cut prices. It also comes as the loan guarantee program has come under heightened scrutiny following the September bankruptcy of solar-panel maker Solyndra LLC, which obtained $535 million in loan guarantees.

A second loan guarantee recipient, Beacon Power Corp. (BCON), filed for bankruptcy in October after accepting a $43 billion loan guarantee to build an energy-storage project in New York state.

The Division of Ratepayer Advocates, a consumer advocate housed at the CPUC, objected to the high price of the Abengoa contract, saying it wasn't competitive with other renewable energy projects and would saddle customers with unreasonable costs.

Approving the project "is signaling to the market that California will accept overpriced renewable energy, and that it is willing to lock customers into higher rates for decades to come," said the division's director, Joe Como.

The price in the Abengoa contract was kept confidential, although the CPUC said it is more than 11.6 cents a kilowatt-hour and is among the highest prices PG&E has agreed to pay for renewable energy.

The Mojave Solar project uses solar-thermal technology in which curved mirrors mounted to the ground collect heat from the sun to warm fluid into steam to drive power turbines. The Energy Department finalized a $1.2 billion loan guarantee for the project in September.

Four of nine California solar-thermal power plants that obtained construction permits and power purchase contracts with utilities have been abandoned this year. Solar Millennium AG (S2M.XE) turned down a $2.1 billion federal loan guarantee for one of those plants, saying difficult market conditions forced it to cancel the project.

California utilities are required to use solar, wind or other renewable power for one-third of the electricity they sell by 2020, as part of the state's 2006 plan to combat climate change.

-By Cassandra Sweet, Dow Jones Newswires; 415-439-6468; cassandra.sweet@dowjones.com

Edison (NYSE:EIX)
Historical Stock Chart
From Apr 2024 to May 2024 Click Here for more Edison Charts.
Edison (NYSE:EIX)
Historical Stock Chart
From May 2023 to May 2024 Click Here for more Edison Charts.