Calpine Corp. is planning to sell 400 MW on a fixed-price basisfor 30 months to Pacific Gas and Electric Co. in the firstbilateral electricity deal for a California utility sinceregulators agreed to allow such transactions in the wake of thesummer’s wholesale price and supply problems.

The deal is expected to be the first of many for California’smajor private sector utilities, and a Southern California EdisonCo. spokesman confirmed his company may make an announcement on asimilar agreement later this week.

Calpine’s pending deal is to start July 1, 2001 when two of itsnatural gas-fired generation plants now under construction inCalifornia are set to come on line. But the supplies, which willlast through the end of 2003, could come from various generationsources in the state, a Calpine spokesman said.

“We also have extra megawatts at the Geysers in northernCalifornia, so we could certainly be providing PG&E power fromour geothermal projects, and Sutter or other new projects as theycome on line would be available,” the spokesman said. “We haven’ttied the contract, which is for baseload electricity, to any onespecific resource.”

Similar discussions are ongoing with other customers inCalifornia, he added. “We like to see a certain amount of ouroutput under long-term contract, and other portions dedicated tothe spot market,” he said. “Recognizing the instability in themarket right now, we are [well advised] to do as much as we can tohelp get [wholesale] costs down because we don’t want to seecontinued uncertainty in the market, and we do want to continuewith an open market.”

In emphasizing that the eventual PG&E utility deal will helpillustrate “the significant benefits customers can enjoy from newpower resources,” Calpine’s James Macias, vice president of assetoptimization, said he is unsure where the other utilities are intheir assessment of bilateral, longer-term power deals. He saidPG&E “moved quickly” on proposals it received as the result ofa recent request-for-proposals process, but Edison is still tryingto determine if it wants to proceed with a contract, and San DiegoGas and Electric Co. decided not to proceed.

“So, I really don’t know where the other utilities are at, andwe’re looking elsewhere to market our power,” Macias said.

PG&E’s only comment through a San Francisco-based utilityspokesperson was that because of the “market-sensitive nature ofthe communications,” it would not discuss any of its bilateralcontract negotiations. “We consider all of this market-sensitiveinformation.”

Richard Nemec, Los Angeles

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