U.S. Bankruptcy Code Safe Harbor Provisions Applicable to Power Purchase and Sale Agreements

Summary

This practice note discusses the U.S. Bankruptcy Code (Bankruptcy Code) safe harbor provisions that exempt specified types of transactions from various restrictions and requirements that apply generally in the event of the bankruptcy of either party to a contract. These safe harbor provisions have been found to apply to power purchase agreements when certain criteria are met. Parties entering into power purchase agreements should therefore pay careful attention to the requirements for application of the safe harbor provisions and the consequences for the parties depending upon whether the safe harbor provisions do or do not apply in bankruptcy. This practice note provides background on the Bankruptcy Code safe harbor provisions and discusses the main concepts, benefits, and issues that counsel to parties involved in power sales transactions should understand.