San Francisco (Platts)--10Nov2011/329 pm EST/2029 GMT

Pacific Gas & Electric, on a 4-1 vote, won California Public Utilities Commission approval Thursday for a power purchase agreement with Abengoa Solar's proposed 250-MW Mojave Solar project.

It therefore nixed another proposal to approve the contract with modifications, which would have put in jeopardy a $1.2 billion US Department of Energy loan guarantee, PUC President Michael Peevey said before the vote (See story, 1236 GMT). A third proposal would have rejected the PPA based the price of the deal.

The PUC's approval represents the final regulatory hurdle for the parabolic trough project. The facility will be located in the Mojave Desert near Barstow, California, and is expected to come online in July 2014.

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"Abengoa has invested five years and about $70 million" on the solar trough project, said Peevey. To make such an investment "only to be rejected by the PUC would send a chilling message to the investment community," he added.

While more expensive, solar thermal technology is far less intermittent than photovoltaic technology, but it makes sense to spend more on Mojave to help PG&E diversify its resource portfolio, Peevey said.

PUC member Mike Florio, who cast the dissenting vote, said solar trough technology has "been around for a long time, and is not getting cheaper, if anything its getting more expensive."

The contract "saddles ratepayers with extraordinary above-market costs," totaling $1.25 billion over the life of the PPA, Florio said.

While they voted to approve the PPA, PUC members Mark Ferron and Catherine Sandoval called for an overhaul of the agency's renewable portfolio standard contract review process.

Sandoval noted that PG&E selected the project for a PPA following a 2007 solicitation. Streamlining the review process will increase the investment community's confidence in the RPS program, she said.

--Lisa Weinzimer, lisa_weinzimer@platts.com

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