Panoche Energy Center, LLC v. Pacific Gas & Electric Co.

In a dispute over who has to bear the costs of complying with state environmental regulations—power company or its supplier—power company correctly invoked arbitration clause in contract governing parties’ business relationship.  Panoche entered into a contract to supply energy to PG&E at a time when the Legislature was considering AB 32, a measure designed to reduce greenhouse gas emissions.  The agreement contained an arbitration clause that said arbitrators could exercise only the powers of a judge, thus incorporating the ripeness limitation that keeps judges from resolving abstract disputes.  Here, the arbitrators decided and the appellate court held that PG&E had properly invoked arbitration to decide whether Panoche had agreed to bear the costs of complying with the nascent AB 32-required changes.  Even though the regulations implementing AB 32 had not been finalized and could eventually provide for a different allocation of compliance costs regardless of what the legacy contracts provided, the issue of what the Panoche-PG&E contract provided was ripe and might influence the regulatory decision.  Hence, the arbitration award should be confirmed.

California Court of Appeal, First District, Division 4 (Streeter, J.); July 1, 2016; 2016 WL 3574540

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