PG&E Corporation Unit Begins Construction Of California's Largest ‘Greenfield’ Merchant Power Plant

La Paloma Facility Will Fill a Critical Need for New Electricity Supplies in California

San Francisco – Welcoming the opportunity to provide competitive electricity to meet the growing electricity needs of California, PG&E Corporation (NYSE:PCG) announced today that its National Energy Group has begun construction on the La Paloma Generating Plant. La Paloma is a 1,048-megawatt, natural gas-fueled combined-cycle facility. The plant is expected to begin operating in the summer of 2001.

PG&E National Energy Group President & CEO Tom Boren said, “The construction of the La Paloma facility is an important step in meeting the growing demand for electricity in the state. We welcome the opportunity to further the growth of customer choice in California's evolving competitive power market.”

The California Independent System Operator (ISO), a non-profit public benefit corporation responsible for maintaining transmission reliability and ensuring adequate electricity supplies, hailed La Paloma as a welcome addition. “As North America’s only regional transmission operator relying on competitive market forces to maintain the critical balance between electricity supply and demand for California’s 27 million electric customers, the California ISO is very pleased that PG&E’s National Energy Group has stepped forward with the La Paloma facility to fill an essential consumer need,” said Cal ISO President & CEO Terry Winter. “This investment shows that the market is responding to the growing demand for electricity.”

“As a highly efficient plant from both an energy and environmental standpoint, California consumers will benefit,” added PG&E Corp.'s Boren. “The La Paloma Generating Plant provides highly competitive costs with a minimum of energy consumption and environmental impacts.”

The La Paloma plant site is approximately 40 miles west of Bakersfield, Calif. in western Kern County on an industrial site previously used for oil production. When completed, it will be the state’s largest facility designed from the ground up exclusively as a merchant power plant. A merchant plant sells its electrical output to wholesale customers in a regional competitive bulk power market. Those wholesale customers, who include traditional utilities, municipal utility districts, retail energy services companies, wholesale power marketers, and electric cooperatives, in turn arrange to have the electricity delivered to retail consumers.

The La Paloma development team has selected ABB ALSTOM POWER Inc. as the turnkey contractor for the project. ABB ALSTOM POWER is responsible for the design and engineering work, the procurement of equipment and management of sub-contractors, and the actual construction of the facility. The La Paloma Generating Project received its California Energy Commission approval in October 1999, and the financing package for the project is being completed now.

“The rigorous permitting process really laid the ground for an outstanding construction program,” said Roger Garratt, project development manager for PG&E Corporation’s generating unit. “We look forward to making a major contribution to the Kern County economy in a manner that is completely compatible with the area's sensitive ecosystem.” Garratt noted the project's plan to permanently set aside conservation land as part of its environmental mitigation program.

PG&E Corporation with 1998 revenues of almost $20 billion, $33 billion in assets, and operations in 27 states, markets energy services and products throughout North America through its National Energy Group. The Corporation has ownership and management interests in more than 30 power plants and has one of the largest energy trading and risk management programs in North America.


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