Calpine Corp. power marketing affiliate Calpine Power Servicessigned a one-year sales agreement with LG&E Energy Marketing(LG&E) to provide 150 MW from Calpine’s Texas power systembeginning January 1999. Calpine’s Pasadena Power Plant will provide140 MW of electricity, with the additional 10 MW coming from thecompany’s Texas City and Clear Lake facilities. With thisagreement, Calpine has now sold all of the power from its existingPasadena facility through 2001.

“The LG&E contract demonstrates the strength of Calpine’sregional systems approach to the power market,” said Calpine VicePresident Diana Naylor. “Energy companies like Calpine must designflexible, low-cost energy solutions to compete in today’s dynamicpower market. Our 1,100 MW system can respond quickly andeffectively to market demand-translating to cost-savings andimproved service for our customers.”

LG&E Group Vice President for Energy Marketing Paul Thompsonsaid, “This agreement is a significant step forward in LG&E’sefforts to mitigate risk from its discounted operations in Texas.In a fast-growing market like Texas, reliability is critical. Withmarketplace competition, low prices are essential. Calpine offeredLG&E a very competitive energy package. LG&E has focusedour ongoing energy marketing activities on an asset-based strategydesigned to optimize the more than 9,000 MW of generating capacityowned or controlled by LG&E Energy Corp.”

Texas represents about 7% of the U.S. power market. Most of thestate is isolated electrically from other U.S. power grids so thatalmost all of the power consumed in Texas must be generated in thestate. The load is growing dramatically. This year, the summer peakload was 6% above 1997 levels. Increased demand, combined with aninsufficient amount of additional power generation, raised marketprices for 1999 capacity to levels ranging between $75-$90 perkilowatt year.

Under the terms of the LG&E contract, energy pricing will bebased on a gas index. Capacity payments have been fixed for theterm of the contract, beginning Jan. 1 through Dec. 31, 1999.

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