The area has been producing geothermal electricity since 1960. Western GeoPower's plant there, scheduled to come on line in 2010, would become the company's first commercial operation.
The contract has a 20-year term, potentially generating $500-million over the life of the deal for Western GeoPower.
The company is also looking at a site in British Columbia near Pemberton, just north of Whistler, where the Meager Creek hot springs draw hikers and tourists, and where the potential energy-generating capacity of underwater streams has been talked about for decades.
The temperature and size of the Meager resource appears capable of supporting a 100-megawatt plant but "the difficulty lies in determining commercial viability - what is the price at which that power can be produced in order to make it economically viable for us," CEO Kenneth MacLeod said.
Previous studies indicated the potential cost of building a plant and connecting it to the provincial grid would likely exceed market prices of electricity, but that picture is changing.
The project would likely be feasible at prices of $100 a megawatt hour, comparable with prices of about $98 a megawatt hour the firm is in line to get under its California agreement, Mr. MacLeod said.
Soaring fossil fuel prices and greenhouse gas concerns are driving interest in geothermal projects, he said. "At 50 dollars a barrel for oil, geothermal is probably competitive at that price. At 100 dollars a barrel, we are way ahead of the curve," Mr. MacLeod said.
Currently, Canada does not have any geothermal electricity generation, which is common in Iceland.