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NEWARK, N.J., June 6, 2002 -- PSE&G and El Paso Merchant Energy recently announced they have amended their non-utility generation (NUG) power purchase agreements for El Paso's Camden, Bayonne, and Eagle Point cogeneration facilities.
The new terms increase El Paso's flexibility in supplying electricity to PSE&G. In return, El Paso affiliates paid PSE&G $166.5 million and agreed to provide minimum supply during peak summer months regardless of the availability of facilities. The New Jersey Board of Public Utilities has approved these amended agreements.
Under the original agreements, PSE&G had to purchase 100 percent of the electricity generated at the 148.5 megawatt (MW) Camden and 195 MW Eagle Point facilities and 24.2 percent of the 165 MW Bayonne facility at set prices. El Paso could not buy electricity from other sources-even if significantly less expensive- to satisfy its PSE&G obligation. Under the new terms, El Paso will provide specified amounts of electric capacity and energy to PSE&G at fixed prices and obtain this capacity and energy either from the existing plants or in the open market.
Under federal law, utilities were required to enter into long-term contracts with new cogeneration facilities. The prices under these contracts were significantly higher than recently's market rates. Under New Jersey's restructuring legislation, utilities are entitled to recover these above-market costs from consumers through the Non-Utility Generation Transition Charge (NTC).
El Paso's payment was applied to the NTC more than offsetting the accrued balance-that would have been paid by the ratepayers -- and helping mitigate the need to raise rates at the end of the electric restructuring transition period.
"These agreements deliver significant economic and reliability benefits to PSE&G ratepayers and contribute to a more efficient operation of the generation market in the Northeast," said Sy Wodakow, manager of non-utility generation, PSE&G. "PSE&G has made significant progress in mitigating the impact of above-market NUG contracts on our ratepayers, saving them in excess of $266 million since July 1998."
"These agreements represent a true win-win for PSE&G ratepayers and El Paso Merchant Energy," said Larry Kellerman, senior managing director of El Paso Merchant Energy. "Our facilities will be transformed from base load generation facilities to intermediate facilities in the electric wholesale power market and at the same time deliver tangible benefits to the electric customers of PSE&G."
The Bayonne, Camden and Eagle Point power purchase agreements terminate in 2008, 2013, and 2016, respectively. The Camden and Bayonne amended agreements became effective on December 13, 2001, while the Eagle Point amended agreement became effective on June 1, 2002. To date, PSE&G has restructured eight non-utility generation power purchase agreements representing 625 MW -- or 90 percent -- of PSE&G's NUG capacity.
PSE&G is New Jersey's oldest and largest regulated gas and electric delivery utility, serving nearly three-quarters of the state's population. PSE&G is a subsidiary of PSEG, a diversified energy company. Other subsidiaries of PSEG include: PSEG Power, a wholesale electric generation and trading company operating in the United States; PSEG Energy Technologies, an unregulated energy services company; PSEG Resources, which makes passive, energy related investments; and PSEG Global, which owns, develops and operates power plants and electric and gas distribution systems throughout the world. (web site address: http://www.pseg.com).
El Paso Corp. is a provider of natural gas services. The company has core businesses in natural gas production, gathering and processing, and transmission, as well as liquefied natural gas transport and receiving, petroleum logistics, power generation, and merchant energy services. For more information, visit http://www.elpaso.com.
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