Calpine

(CPN)

has flipped the switch on a $4.6 billion deal to sell electricity to the state of California over the next 10 years.

The fixed-price contract was arranged with the

California Department of Water Resources.

The agreement takes effect Oct. 1 and lasts through 2011. Initial deliveries are set for 200 megawatts and will reach 1,000 megawatts by Jan. 1, 2004. The California Department of Water Resources will purchase the power directly from Calpine, which is based in San Jose, Calif.

The deal represents one of the first transactions resulting from long-term power legislation signed by Gov. Gray Davis. Calpine has recently signed mutliyear, power sales agreements with the

Sacramento Municipal Utility District

,

Modesto Irrigation District

,

Imperial Irrigation District

and the

Association of Bay Area Governments

.

Calpine will power up two new generation facilities this summer that are expected to produce enough electricity to power more than one million Northern California homes. Additional power plants are in the planning stages.

In recent trading on the

New York Stock Exchange

, Calpine gained $2.32, or 5.9% to $41.95.

Last week, the

California Assembly

approved and sent Gov. Davis legislation authorizing the state's Department of Water Resources to buy power and sell it to customers of California's two beleaguered utilities,

Pacific Gas & Electric

, a subsidiary of

PG&E

(PCG) - Get Report

, and

Edison International's

(EIX) - Get Report

Southern California Edison

unit.