CA's First Bilateral Power Deal Surfaces
Calpine Corp. is planning to sell 400 MW on a fixed-price basis
for 30 months to Pacific Gas and Electric Co. in the first
bilateral electricity deal for a California utility since
regulators agreed to allow such transactions in the wake of the
summer's wholesale price and supply problems.
The deal is expected to be the first of many for California's
major private sector utilities, and a Southern California Edison
Co. spokesman confirmed his company may make an announcement on a
similar agreement later this week.
Calpine's pending deal is to start July 1, 2001 when two of its
natural gas-fired generation plants now under construction in
California are set to come on line. But the supplies, which will
last through the end of 2003, could come from various generation
sources in the state, a Calpine spokesman said.
"We also have extra megawatts at the Geysers in northern
California, so we could certainly be providing PG&E power from
our geothermal projects, and Sutter or other new projects as they
come on line would be available," the spokesman said. "We haven't
tied the contract, which is for baseload electricity, to any one
Similar discussions are ongoing with other customers in
California, he added. "We like to see a certain amount of our
output under long-term contract, and other portions dedicated to
the spot market," he said. "Recognizing the instability in the
market right now, we are [well advised] to do as much as we can to
help get [wholesale] costs down because we don't want to see
continued uncertainty in the market, and we do want to continue
with an open market."
In emphasizing that the eventual PG&E utility deal will help
illustrate "the significant benefits customers can enjoy from new
power resources," Calpine's James Macias, vice president of asset
optimization, said he is unsure where the other utilities are in
their assessment of bilateral, longer-term power deals. He said
PG&E "moved quickly" on proposals it received as the result of
a recent request-for-proposals process, but Edison is still trying
to determine if it wants to proceed with a contract, and San Diego
Gas and Electric Co. decided not to proceed.
"So, I really don't know where the other utilities are at, and
we're looking elsewhere to market our power," Macias said.
PG&E's only comment through a San Francisco-based utility
spokesperson was that because of the "market-sensitive nature of
the communications," it would not discuss any of its bilateral
contract negotiations. "We consider all of this market-sensitive
Richard Nemec, Los Angeles
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