San Jose, CA-based independent power company, Calpine Corp., Friday announced it has reached a binding agreement with Pacific Gas and Electric Co. to modify and assume all of Calpine’s Qualifying Facility (QF) contracts with PG&E, which means the utility accepts responsibility for $267 million in past-due billings it owes Calpine. The 11 contracts cover about 600 MW of power supplies.

Both economic and operating reliability will be assured from these plants since the power plant developer/operator “forced an early resolution of this in bankruptcy court,” according to Calpine officials briefing news media in a conference call. The deal provides both “predictability” and “assurance of an earnings stream” for Calpine.

Calpine and PG&E filed a stipulation with the federal bankruptcy court in San Francisco Friday, seeking authorization for PG&E to assume the modified Calpine QF contracts. The court is scheduled to approve the agreement on July 12, 2001.

Under the terms of the agreement, which is an outgrowth of a recent state regulatory decision, Calpine will continue to receive its contractual capacity payments, plus a five-year fixed energy price component of approximately 5.37 cents/kwh. In addition, all past due receivables under the QF contracts will be elevated to administrative priority status and paid to Calpine, with interest, upon the effective date of a confirmed plan of reorganization for the PG&E utility.

Calpine considers the pricing spreads between fuel costs and the 5.37 cents/kwh price “very attractive,” according to the merchant generator’s officials, who noted that the company has locked in natural gas supplies for the QF plants in the $3 to $4/MMBtu range. The deal is effective when the reorganization plan for the PG&E utility is accepted and the company begins to exit bankruptcy.

“Administrative claims enjoy priority over payments made to the general unsecured creditors. As of April 6, 2001, Calpine had recorded approximately $267 million in accounts receivable with PG&E under its QF contracts,” Calpine said in a written announcement. “QF facilities are an integral part of California’s energy market, representing more than 20 percent of the state’s power supply.

“Calpine is the first power company to modify its QF contracts with PG&E,” said James Macias, Calpine senior vice president, noting that it helps ensure Northern California consumers will continue to benefit from these affordable and reliable energy resources. “As the state’s leading developer of modern energy facilities, we remain committed to California’s power industry.”

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