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Chapter 11 Update: PG&E Announces Long-Term Qf Agreement With Calpine Corporation

07/06/2001

San Francisco — Pacific Gas and Electric Company today announced a five-year agreement with Calpine Corporation's qualifying facilities (QFs), ensuring the utility receives a reliable supply of power at an average energy price of 5.37 cents per kilowatt-hour.

Under the terms of the deal, Pacific Gas and Electric Company will assume the 13 Calpine QF contracts and pay the approximately $265 million in pre-petition debt on the effective date of a confirmed plan of reorganization.

Calpine's 13 QFs provide an average of 450 megawatts of delivered power to the utility. By locking into the fixed cost, Pacific Gas and Electric Company will help protect its customers from the market fluctuations in the wholesale market. A recent CPUC decision (D.01-06-015) allowed QFs to enter into long-term contracts at an average energy price of 5.37 cents per kilowatt-hour.

"By insulating against volatile natural gas prices, this agreement will help ensure our customers receive a reliable source of power at reasonable prices over the next five years," said Kent Harvey, Pacific Gas and Electric Company's senior vice president and chief financial officer. "We believe this plan can serve as a framework for ongoing discussions with our QFs."

Pacific Gas and Electric Company is willing to enter into similar type agreements for any of its other 300 QF contracts, and is currently in discussion with some QFs. On June 29, the company filed a statement with the U.S. Bankruptcy Court to make its final decision on whether to assume or reject its QF contracts in coordination with the plan of reorganization.

Today's agreement with Calpine is consistent with the filing because the payment of the past costs will be made upon the effective date of the plan of reorganization. A copy of the agreement will be filed with the U.S. Bankruptcy Court, and a hearing on the issue is scheduled for July 12.

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