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CA's First Bilateral Power Deal Surfaces

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 specific resource."

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 information."

Richard Nemec, Los Angeles

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