PG&E Corp.'s (PCG) utility said Wednesday that it has signed a contract with DTE Energy Co. (DTE) to purchase the output from a 45-megawatt biomass power plant.

The proposed facility would be built to replace an existing coal-fired power plant in Stockton, Calif., owned by FPL Group Inc. (FPL) unit NextEra Energy Resources. PG&E asked state regulators for permission to terminate a contract it has with NextEra, and execute its contract with DTE Energy.

If the California Public Utilities Commission approves the transactions, NextEra will sell the coal facility to DTE, which will then renovate the plant to run on biomass material, such as wood waste, and begin operating it as a renewable power facility in 2013, PG&E said in a document filed with the CPUC.

Terms of PG&E's deal with DTE weren't disclosed, although the price the utility agreed to pay for the biomass power is above the benchmark price of 12.9 cents a kilowatt-hour set by the CPUC for utility renewable-energy contracts.

DTE, which owns utilities in Michigan and a coal marketing unit, among other businesses, owns a biomass unit that captures methane from landfills and abandoned coal mines and converts the gas into electricity.

PG&E and other California utilities are required to use renewable sources for a fifth of the power they sell by the end of 2010, with the mandate ramping up to one-third of their retail power by 2020.

Shares of PG&E closed Wednesday 29 cents lower at $45.01, while DTE shares closed 13 cents lower at $43.81 and FPL shares closed 54 cents lower at $54.86.

-By Cassandra Sweet, Dow Jones Newswires; 415-439-6468; cassandra.sweet@dowjones.com
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