Constellation signs $3.6 billion contract with California

A unit of Baltimore's Constellation Energy Group Inc. Monday confirmed it signed a $3.6 billion long-term power supply contract with the California Department of Water Resources (DWR). Under terms of the 10-year contract with DWR, Constellation Power Source will begin selling generation beginning in April 2001, but the company did not say how much will available during this summer's peak demand. Nor did the company release how much the company is receiving per megawatt-hour for power.


By the OGJ Online Staff

HOUSTON, Mar. 12�A unit of Baltimore's Constellation Energy Group Inc. Monday confirmed it signed a $3.6 billion long-term power supply contract with the California Department of Water Resources (DWR).

Under terms of the 10-year contract with DWR, Constellation Power Source will begin selling generation beginning in April 2001, but the company did not say how much will available during this summer's peak demand. Nor did the company release how much the company is receiving per megawatt-hour for power.

Last week, California Gov. Gray Davis named Constellation as among generators with whom the DWR was in negotiations.

Under terms of the agreements reported by Davis, the average price of the power was $79/Mw-hr for the first 5 years. In the second 5 years the price drops to $61/Mw-hr. The prices include power sold during peak periods, according to the governor. Individual contract terms were not released. He said the prices were 75-80% below today�s spot market prices for power.

Terms of some of the long-term contracts include speeding up construction of new power plants. About 5,000 Mw is scheduled to come on line within 24 months. The 10-year contracts were limited to generators that can provide power supplies starting no later than the third quarter of 2001.

Constellation said the contract volume will increase to 800 Mw of electricity once Constellation's High Desert power plant begins commercial operation in July 2003. The electricity will be sold directly to DWR on a 24-hr, 7-day-a-week basis.

Constellation Energy Group Co-Pres. Eric Grubman said the company has worked on the High Desert project in Victorville in southern California for several years.

"Despite recent turmoil in the western markets," Grubman said, "we believe that cost-effective, energy-efficient power plants can be sited in California at prices which are acceptable to both investors and consumers."

Constellation is scheduled to begin construction in April on the High Desert combined cycle, gas-fired plant northeast of Los Angeles. High Desert will be the first new major power plant to serve the southern California area in more than a decade.

The DWR was authorized to make both short and long-term power purchases under state legislation enacted Feb. 2. DWR has been negotiating long-term contracts to save the state money by getting out of the more expensive real time markets. The state�s independent system operator's load varies from 27,000 MW to 45,000 Mw at summer peak to serve California�s electricity needs.

Constellation recently reported plans to separate its wholesale merchant energy and retail energy businesses into two stand-alone, publicly traded companies this year. Constellation affiliates currently own or control more than 9,000 Mw of electric generation throughout North America.

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