The excessively wet hydroelectric season in the West continues to hurt Calpine Corp.’s large fleet of natural gas-fired generation plants, Calpine senior executives told financial analysts Friday during a second quarter earnings conference call in which the large independent power company reported losses for the second quarter.

Calpine recorded a net loss of $70 million, compared to a bigger $115 million loss in the second quarter of 2010. CEO Jack Fusco remained bullish toward natural gas and Calpine’s prospects in a recovered U.S. economy, which he now thinks will be slower in developing than anticipated at the beginning of the year.

With the increased emphasis on lowering carbon emissions, Fusco continues to emphasize that “increased reliance on gas-fired generation is an obvious and affordable solution.” He compared the “levelized, lifecycle costs” of various generation technologies against combined-cycle gas turbine technology.

“In a world of scarce financial resources and energy inflation concerns, why on earth would anyone spend two to five times more on our electricity bills? Instead we should be using a relatively clean, reliable, affordable abundant energy source like natural gas,” he said.

Fusco said to make 1,000 MW of offshore wind-generated power competitive with 1,000 MW of combined-cycle gas-fired generation would require what he calculates to be nearly $600 million annually in taxpayer or utility ratepayer subsidies. In the current economy, he argued that it is “unfair and burdensome” on taxpayers and consumers.

While reporting production flat in all of its regions, except the West where it was down substantially, Calpine COO Thad Hill said the company’s western power plant fleet’s capacity factor in the second quarter was operating at only about 25%. It was “driven down by exceptional hydro conditions that continue to persist,” Hill said.

In response to a question from an analyst, Hill said the impact of the excess hydro on Calpine will continue at least through mid-August. He said there is less water being spilled at night, but he situation is only at the “beginning of the end” of the full impact of this year’s record water levels from the Pacific Northwest through Northern and Central California.

One operating impact from all of the hydro is that Calpine has had to cycle on and off its western plants far more than normal, and that adds to wear on the generation units and can add to increased outages in the future. So far most of the unplanned outages Calpine has had, however, have been due to transformer issues, rather than problems with the generation units, Hill said.

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