After years of trying to find a buyer for the output of its Morro Bay facility, Duke Energy signed a two-and-a-half-year contract with the old plant?s original owner, Pacific Gas & Electric. On February 23, PG&E formally agreed to buy 650 MW from Duke?s units 3 and 4 to meet its energy and capacity needs through 2007 at a price not revealed. ?These units can either serve as reserve capacity or follow our customers? peak needs during hot summer days,? said Fong Wan, PG&E vice-president of power contracts and electric resources development. Last October, Duke solicited offers to buy the water-cooled facility or its energy (<i>Circuit<\/i>, Oct. 15, 2004). The two on-line units have been running at about 5 percent of capacity in the last couple of years, which has been a financial drain on their owner, according to Pat Mullen, Duke spokesperson. Two other units at the generating facility have been mothballed. PG&E filed an advice letter with the California Public Utilities Commission the same day the contract was announced, seeking approval of the power-purchase agreement. Meanwhile, Duke Energy and the city of Morro Bay have not yet resolved their dispute over the cost of a lease for the power plant?s outfall pipe. ?We are still hopeful we can come to an acceptable resolution,? Mullen said. He added he was unsure what effect the contract would have on the protracted negotiations. The city is seeking a minimum $100,000 annual rent for the outfall pipe that sits on city land. Previously, the city did not charge rent on it. Earlier, Duke said it couldn?t reach agreement on a lease until it knew whether it would be able to modernize the facility.