On the eve of emerging from Chapter 11 bankruptcy, Pacific Gas and Electric Co. announced last Wednesday it made 2003 local franchise fee and surcharge payments totaling $42 million in 49 California counties in which it operates. The payments, which were nearly equal for natural gas and electric facilities, represent a 22% increase over the combination utility’s 2002 payments. The fees are a percentage of gross receipts on the utility’s system that are paid to cities and counties for the “right to use public streets” in which to run gas and electric service pipes and wires, PG&E’s utility said in its announcement. The franchise fee surcharges are a percentage of the transportation and energy costs to customers choosing to buy their energy from third parties, or so-called “exit fees.”

Following the resolution of jurisdiction late last month, Aquila Inc. said last week that it has assigned its 50% ownership of MEP Pleasant Hill LLC (MEPPH) to Calpine Corp. and ended its 20-year merchant toll. MEPPH, previously jointly owned by Aquila and Calpine, operates the Aries power plant, a 585 MW, non-regulated, natural gas-fired facility in Pleasant Hill, MO. Under a competitively bid, four-year contract that expires in 2005, MEPPH also provides up to 500 MW of power to meet the needs of Aquila’s regulated utility customers in northwest Missouri. This contract is not affected by the transaction. In connection with the transaction, Aquila said it also paid Calpine $5 million and agreed to assign to Calpine certain transmission rights to the 500 MW east ERCOT/SPP DC tie beginning July 1, 2004.. The company noted that its payment to Calpine was more than offset by a permanent return of $12.5 million of collateral that Aquila had previously provided to Calpine in support of ongoing energy trading contracts. Aquila’s capacity payments under the terminated merchant tolling contract were scheduled to increase to an annual rate of nearly $23 million a year beginning in 2005. Aquila said it will recognize a loss of approximately $46.5 million on the transaction.

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