After struggling through an extended state approval process thatwas only revitalized earlier in the year with a uniquemobile-source air emissions credit deal, San Francisco-basedPG&E Corp. Monday completed a deal to sell the development andoperating rights for its proposed 500 MW Otay Mesa power projectsouth of San Diego to Calpine Corp., San Jose, CA, the aggressivemerchant power plant developer.

Terms of the deal were not disclosed, other than the fact thatPG&E’s National Energy Group will contract for up to half ofthe plant’s output (250 MW) via a 10-year natural gas tollingarrangement with Calpine.

Saying both companies are “committed to working together tobring this project online as soon as possible,” Calpine advisedthat both of the companies ultimately will be selling power fromthe plant on part of a 46-acre tract near the U.S.-Mexico border,which would be the first power plant to be built in San DiegoCounty in almost 30 years. Mid-2003 is the current target date forbringing the facility into production.

PG&E’s Thomas King, president/COO of its National EnergyGroup’s western region, said he is “proud of the progress (PG&Ehas) made toward getting this plant licensed for construction (bythe state energy commission). Now, we will work closely withCalpine and regulators to ensure that the project continues to moveforward.”

In addition to state-of-the-art air emission controls and aspecial water conservation technology, the proposed Otay Mesa planthas what PG&E and Calpine call a “first-of-its-kind” programusing emission reduction credits from the conversion to naturalgas-fueled trucks by a refuse-hauling firm in San Diego County.

The proposed plant is now slated for state approvals “early in2001,” according to Calpine officials, and at the time it gets theokay for construction, ownership will be transferred to Calpine,which presently plans on construction to start in the summer nextyear.

“This project will improve the supply-demand balance in SanDiego’s electricity market and will maintain the region’senvironmental quality,” said Peter Camp, Calpine, vice president.

Calpine currently has three plants totaling 1,900 MW underconstruction in California, with additional plants totaling 2,100MW proposed. Along with 1,300 MW of existing geothermal and naturalgas-fired generation in the state, Calpine expects to provide 5,300MW capacity among its portfolio of plants in the next three or fouryears.

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