Monday March 5, 2:00 am Eastern Time

Calif. energy deals could fall short at peak -WSJ

NEW YORK, March 5 (Reuters) - Long-term electricity contracts designed to aid energy-short California so far appear to fall far short of providing sufficient power at stable prices needed this summer when supply problems are expected to be acute, the Wall Street Journal reported in its online edition on Monday.

Two electricity suppliers, Calpine Corp (NYSE:CPN - news) of San Jose, California, and Williams Cos (NYSE:WMB -news) of Tulsa, Oklahoma, say they have agreed to provide as much as 4,000 megawatts of energy over the next 10 to 20 years, the paper said.

However, they are obligated to supply only 640 megawatts, less than two percent of the state's peak need this summer when hot weather pushes up demand.

California is in the midst of a chronic shortage of power supplies, which forced rolling blackouts in the northern part of the state twice in January.

The two suppliers would together provide only about a tenth of the state's power needs under the fixed-price contracts over their full terms, the paper said.

California has released little information about the contracts, so it is possible other deals have been struck, the paper said. But it appears there is still a large gap to bridge between what the state needs to avoid price volatility and what it has secured.

One member of the state negotiating team, recruited by Governor Gray Davis, was reported as saying more contracts may be announced this week.

Although neither Calpine nor Williams has directly divulged the prices they are being paid, information they have released suggests the state will pay them between $15 billion and $20 billion in aggregate during the next 10 to 20 years, the paper said.

Calpine will receive an average price of $58.40 per megawatt hour for 1,000 megawatts of capacity which will be phased in starting this October and ending in 2004, the paper said.

The total value of that contract is $4.6 billion over 10 years, according to the report.

Calpine will garner an additional $61.10 per megawatt hour for another 1,000 megawatts of power with first deliveries this July, the paper said.

That 10-year contract is valued at $5.2 billion, it said.

Lastly, the independent power producer said it will get at least $156 per megawatt hour for 495 megawatts of power generated by small ``peaking plants'' that operate only when demand is greatest, the paper said. That 20-year contract, which only ties up 25 percent of the plants' potential output, will fetch at least $3.1 billion for Calpine, it added.

-- Swissrose (cellier3@mindspring.com), March 05, 2001