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PG&E Eyes $1.5B in New Power Projects in North CA

In a clear indication that privately financed, natural gas-fired power generation is still in fashion, Pacific Gas and Electric Co. Tuesday announced a recent request-for-offers (RFOs) has turned up 1,760 MW of new combined-cycle generation plants, equating to more than $1.5 billion of new energy infrastructure in the northern half of California. The RFO drew more than 50 respondents, totaling more than 12,000 MW -- all natural gas-fired supplies, PG&E's utility said.

The deals, including both utility-owned generation and purchased power agreements, will have to be approved by the California Public Utilities Commission. And the new plants, all of which will be dry- or evaporative-cooled, will be subject to various air emission restrictions, which are getting increasingly restrictive in the state. Terms and conditions of the deals remain confidential, PG&E said, noting that the power supply contracts range from 10 to 20 years in duration.

Tuesday's announcement did not include $1 billion in energy efficiency/renewable investments that the utility previously announced it will be pursuing over the next three years. Those energy-saving and so-called "clean" energy projects will provide the equivalent of 1,000 MW of new generation and 300 MW/year over five years of new renewable supplies, according to Pacific Gas & Electric Co. CEO Tom King. The announcement also did not include the 530 MW natural gas-fired plant the utility is developing in Contra Costa County across the bay from San Francisco in a project PG&E took over from Mirant, the original developer.

In addition, King said that the utility is only "days or weeks" away from announcing several other projects -- another utility-owned new power plant and two other smaller purchased power agreements.

The $1.5 billion in projects cited Tuesday include three purchased power agreements totaling 1,120 MW -- two in the Fresno area to be built and operated by private equity investors and a third being Calpine Corp.'s proposed 600 MW gas-fired power plant in the East San Francisco Bay suburb of Hayward, CA. A fourth project will be a new 660 MW gas-fired plant that PG&E's utility will own and operate in Colusa County north of the state's famed wine country in Napa and Sonoma Counties.

The utility RFO did not specify gas-fired power sources, but the requirements for both peaking and load-following baseload supplies, drew only natural gas project proposals, according to Ray Kuga, the utility's vice president for energy supply.

PG&E's King said the utility is "thrilled" with what he called a "robust response from the market" that will allow "significant new technology and infrastructure" to be added to the state's energy mix.

In response to a question on a conference call with news media, King and Kuga said their utility is not turning its back on existing power plants -- many owned and operated by bankrupt Calpine -- noting PG&E has many contracts with existing operators in the state and will continue to sign more deals. In response to another question about Calpine's financial health, Kuga said PG&E's utility is not worried about signing the purchased power deal with Calpine's still-to-be-built Hayward facility.

"The Calpine project is in a very attractive location from the standpoint of serving our Bay Area load center," Kuga said. "We believe the project would proceed whether it was Calpine or some other entity. In addition, we have been very careful to structure our arrangement with Calpine, subject to bankruptcy court approval, and in a manner in which the counterparty will be a nonbankrupt entity or a separate new entity not associated with Calpine's bankruptcy."

King said the new deals reached as part of the RFO represent "PG&E's vision of a cleaner future for California and represent the most attractive resources that utilize the latest in fuel-efficient technological advancements in power plant design."

Overall, the utility will now count on an added 1,000 MW of energy efficiency programs by 2008; 1,500 MW of additional renewable supplies by 2010, and 1,780 MW from new generation sources by 2010, King said.

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