Calpine Corp. has completed the acquisition of the 500 MW Otay Mesa Generating Project near the Mexican border from developer PG&E National Energy Group. The project, which is targeted for completion in mid-2003, is billed as the first new generating project in San Diego County in 30 years.

Construction is expected to begin later this summer. It was licensed by the California Energy Commission in April. Under the terms of the sale, Calpine will build, own and operate the facility and PG&E National Energy Group will contract for up to 250 MW of output.

“This project will directly address the electricity supply imbalance that currently exists in San Diego County,” said Ron Walter, Calpine senior vice president-business development. “Otay Mesa is an important component needed to ensure price stability and power reliability for San Diego and all of California.”

The Otay Mesa Generating Project will be located within a 46-acre property on the eastern portion of Otay Mesa, near the base of the San Ysidro Mountains, approximately 1.5 miles from the United States-Mexico border.

Designed as a highly efficient, combined-cycle generating station, the Otay Mesa facility will be fueled by natural gas and will include state-of-the-art emission control equipment and water conservation technology. In addition, in a first-of-its-kind program, the Otay Mesa Generating Project will utilize mobile emission reduction credits to offset emissions. A large portion of the mobile credits will be created through the conversion of refuse-hauling vehicles in San Diego to natural gas fuel.

Power from the Otay Mesa plant will be sold into the California wholesale market. As part of the agreement to sell the project to Calpine, the PG&E National Energy Group will enter into a 10-year tolling arrangement under which it will contract for up to 250 MW. Calpine will market the balance of the output through its energy services group.

In addition to the capacity it will receive from the Otay Mesa Plant, the PG&E National Energy Group is constructing a 1,000 MW LaPaloma plant near Bakersfield, CA, which is expected to be fully operational by mid-2002. Additionally, the PG&E National Energy Group is in the process of acquiring 66 MW of wind generation near Palm Springs, and it is also developing with Sempra International the proposed North Baja Pipeline, which will provide a potential new source of natural gas for Southern California and northern Mexico.

In total throughout the West, the PG&E National Energy Group, a subsidiary of San Francisco-based PG&E Corp., has more than 4,000 MW of new generation in construction or advanced development.

Building upon its existing 2,425 MW natural gas and geothermal operating portfolio, San Jose-based Calpine has launched the largest power generating initiative in the state with 1,950 MW of energy centers under construction in and around California, and has announced the development of an additional 3,850 MW of generation.

By the end of 2005, Calpine plans to build more than 12,000 MW of generation dedicated to restoring the stability of California’s energy markets. Calpine’s total North American portfolio will exceed 70,000 MW by the end of 2005. The company recently announced the acquisition of a 1,200 MW natural gas-fired plant in the United Kingdom. To date, the company has approximately 34,000 MW of baseload capacity and 7,200 MW of peaking capacity in operation, under construction, pending acquisition and in announced development in 29 states, the United Kingdom and Canada.

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