Reply #18: Calpine asks court to void 8 power contracts

[UpInArms]

http://www.marketwatch.com/news/story.asp?guid=%7B1FF08B02%2D1055%2D4170%2DBD19%2D64F4CAF202E7%7D&symbol=

NEW YORK (MarketWatch) -- Calpine Corp. (CPNL) asked a federal judge late Wednesday to void eight power supply agreements as part of the company's bankruptcy proceedings, including a massive, politically sensitive contract that serves the California utility Pacific Gas & Electric Co.

Calpine would lose $1.2 billion if forced to supply power through the expiration of all eight contracts, the merchant generator said in its court filing with the U.S. Bankruptcy Court of the Southern District of New York.

The Calpine customers with threatened contracts are Edison International (EIX) unit Southern California Edison, Acadia Power Partners, PG&E (PCG) unit Pacific Gas & Electric Co., Reliant Energy Electrical Solutions, the Northern California Power Agency and Strategic Energy, which is the retail supply subsidiary of Great Plains Energy (GXP).

Calpine signed all of these contracts between 2001 and 2003, when natural gas, the main fuel for Calpine's power plants, was much cheaper than it is today.

"With rapidly escalating costs to produce electricity, and generally fixed historical prices for the sale of electricity, the debtors have suffered substantial losses on the unprofitable contracts," Calpine said in its filing.

The largest contract was negotiated by the California Department of Water Resources on behalf of Pacific Gas & Electric during the state's energy crisis of 2001. Voiding it could be a tough, politically charged fight for Calpine, as California Attorney General Bill Lockyer petitioned the Federal Energy Regulatory Commission on Monday to prevent the move, which would expose PG&E and its customers to California's spot electricity market.

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