Calpine looks to assume California Department of Water Resources power contract

By Caroline Salls

Pittsburgh, Aug. 24 - Calpine Corp. is seeking court approval to assume its power sales agreement with the California Department of Water Resources, according to a company news release.

Calpine said assumption of the contract will resolve power contract-related issues between Calpine, the California Department of Water Resources, California attorney general Edmund G. Brown Jr. and the California Electricity Oversight Board.

"Since entering into our power sales agreement with the Department of Water Resources in 2001, Calpine has continued to meet all of our performance obligations under this contract," chief executive officer Robert P. May said in the release.

"Today's filing also will allow Calpine to remove a potential impediment to our timely emergence from Chapter 11."

Under the power sales agreement with the California Department of Water Resources, Calpine is contracted to provide 1,000 megawatts of fixed-price electricity through Dec. 31, 2009.

According to court documents, following its Chapter 11 filing, Calpine requested court approval to reject the power purchase agreement based on its market-to-market value at that time.

However, the contract rejection motion was dismissed, and Calpine and its official committee of unsecured creditors appealed the dismissal.

However, during negotiations over objections to Calpine's plan of reorganization, the company said it re-evaluated the contract and subsequently agreed to assume it.

Under the related settlement, the plan objections will be withdrawn, as will the dismissal appeal.

A hearing is scheduled for Sept. 11.

Calpine, a San Jose, Calif., power company, filed for bankruptcy on Dec. 20, 2005 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 05-60200.

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