Calpine To Sell Energy to Calif.

By Kelly Yamanouchi Associated Press Writer

Wednesday, Feb. 7, 2001; 8:31 p.m. EST Fair use for educational purposes only!

SAN FRANCISCO –– Calpine Corp. said Wednesday it has signed a 10-year contract to sell electricity to California, a move that should help provide a more dependable power supply to the energy-starved state.

The contract, valued at $4.6 billion, is one of the first the state has signed and commits Calpine to sell electricity directly to the state Department of Water Resources.

The contract starts in October and will provide a constant block of power starting with 200 megawatts, enough to power about 200,000 homes, and rising to 1,000 megawatts by January 2004.

The state Department of Water Resources announced Tuesday that it is signing long-term deals for power, but has not confirmed that an agreement was made with Calpine. The governor's office said it would not comment on specifics of the deals, saying that could compromise negotiations.

Gov. Gray Davis signed a $10 billion measure last week that lets the state buy power for customers of Pacific Gas & Electric Co. and Southern California Edison, both denied credit by suppliers because of concerns about their solvency.

The two utilities say they have lost $12.7 billion since June due to high wholesale electricity costs and a 1996 deregulation law that blocks them from passing on the costs to consumers.

California has been spending $40 million to $50 million a day buying power on the spot market, and is hoping to establish a more reliable and much cheaper source of energy by using $10 billion raised through revenue bonds to sign long-term contracts at lower rates.

The agreements announced Tuesday range in length from three to 10 years and provide for 5,000 megawatts, enough to power 5 million homes.

During the hot summer months, the state's demand for power can reach 45,000 megawatts at peak hours. The DWR will be responsible for purchasing roughly one-fourth of that.

The purchase price was not disclosed, although state officials said last month that an auction they held on the Internet brought in sealed bids averaging $69 a megawatt hour. The spot market price has been $250 or more during the current shortage.

While the agreements appear to be a good deal for the state, if Calpine can procure natural gas at reasonable rates, "it's probably also a good deal for Calpine," said Mike Worms, an energy analyst at Gerard Klauer Mattison & Co.

© Copyright 2001 The Associated Press

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