Calpine Corp. signed two more long-term contracts withCalifornia’s water resources department (DWR) to provide up to1,500 MW collectively in deals that span 10 and 20 years. The valueof the contracts was estimated at $8.3 billion.

Calpine’s announcement was another indication that the state isseeing some results from its month-long efforts to secure morelong-term power supplies. With three new plants now underconstruction, two of which are supposed to start operating thissummer, Calpine had earlier in February signed a 10-year, 1,000-MWdeal with DWR valued at $4.6 billion. The three deals now representup to almost 2,500 MW worth nearly $13 billion.

Calpine vice president for California operations, Jim Macias,called the new deals a “win-win” for the state, noting Calpine”remains committed to providing innovative and cost-effectiveenergy solutions.” He said the contracts are a direct result of itsability to rapidly add new natural gas-fired generating plants inthe state, one of which is the controversial Silicon Valley-basedMetcalf Energy Center that is stuck in the state approval processwith strong local opposition from the city of San Jose. Three otherplants are currently being developed, including the Otay Mesaproject near San Diego that could gain state approval in March.

The contracts involve both baseload and peaking supplies ofpower. The latter are contingent upon Calpine developing 11 newgenerating units for operation in peak-demand periods. Until thecompany has more site-specific proposals it cannot make anyestimates on the total added natural gas supplies it will have toline up for these projects. Calpine already owns both natural gasreserves and in-state pipelines in northern California.

The $5.2 billion, 10-year deal involves up to 1,000 MW andbegins July 1 this year with 200 MW, growing to the 1,000-MWmaximum volumes a year later (July 1, 2002). These supplies will besold to the state on a 24/7 basis, according to Calpine.

The other deal is for up to 495 MW over a 20-year period,totaling $3.1 billion. Deliveries under this contract will beginonce the new units have been sited, fully permitted and broughtinto commercial operation, Macias said. “The company is proposingto build these natural gas-fueled peaking generators to help ensurethe reliability of California’s power grid during high power demandperiods.”

Meanwhile, California’s electricity woes were evident on bothcoasts yesterday as the state transmission grid operator, Cal-ISO,was forced to issue its first power alert in six days, and Gov.Gray Davis met in New York City with financial analysts andcorresponded with the Secretary of Energy in Washington.

The governor sent a five-page letter to DOE Secretary SpencerAbraham on Monday detailing California’s energy conservationprograms and state efforts to speed the development of newgeneration plants, including 5,000 MW by this summer, 20% of whichare covered by Calpine’s two plants now under construction.

The letter was designed to show California is doing all it canto clean up the mess in its own house. It went into a lot of detailon how much California has saved and intends to save in demand-sidemanagement and conservation programs.

“Preliminary estimates for January 2001 indicate that the stateexperienced an overall reduction of 2,000 MW from what the overallanticipated load should have been, absent recent conservation andefficiency efforts,” the letter stated.

While the governor was away, however, the Cal-ISO declared aStage Two power alert Wednesday after five days of adequate powerreserves. The level-two alert, indicating reserves would drop below5%, was caused by a combination of unexpected losses of generatingunits in Northern California, Oregon and Montana, Cal-ISO said.

In total, 10,600 MW of generating capacity in California was outof service for planned or unplanned maintenance on Wednesday (thattotal had been at 8,000 MW or lower in recent days). The Oregon andMontana generating capacity decreases reduced the amount of poweravailable for import into California.

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