Texas regulators OK cost recovery for Entergy's new 993-MW gas plant

Houston — Texas regulators approved on Jan. 14 Entergy Texas' proposed generation cost recovery rider designed to raised $86.1 million a year to defray about 92.5% of the recoverable $689.6 million cost of its new 993-MW natural gas-fired Montgomery County Power Station, which started up Jan. 1.

The new power supply may already be affecting power prices in the Midcontinent Independent System Operator's Texas Hub, judging from the relative changes in power prices versus gas prices in the region.

At the Texas Hub, day-ahead on-peak locational marginal prices have averaged $26.18/MWh Jan. 1 through Jan. 14, up almost 20% from the average of $21.83/MWh for the same period of 2020, according to S&P Global Platts price data.

But natural gas prices at the Houston Ship Channel have increased at a faster rate. The spot price averaged $2.607/MMBtu so far in 2021, up almost 35% from the $1.935/MMBtu average for the same period of 2020.

The Public Utility Commission of Texas' approved GCRR reflects a Dec. 16 settlement agreement which stipulates the sale of a 7.55% interest in the new power station to East Texas Electric Cooperative and Entergy's proposed acquisition of the Hardin County Peaking Facility at an estimated net book value of $36 million.

The revised GCRR is designed to raise $86.1 million a year indefinitely, until the rates are revised. However, the PUC abated the GCRR until such time as the transaction closes on Entergy's acquisition of the Hardin County Peaking Facility (Project No. 51381).

S&P Global Market Intelligence lists the Hardin County Peaking Facility, a 172-MW power plant with two gas turbines built in 2010, as having an estimated capacity factor of 2.6% in 2019 with an estimated operating-and-maintenance cost of $53.64/MWh. The plant is located north of Beaumont, Texas, near the Louisiana state line.

Entergy Texas lies in the Midcontinent Independent System Operator's Texas Hub, where day-ahead on-peak LMPs averaged $26.68/MWh in 2020.

Peaker plant transaction

The PUC discussed but ultimately took no action on Entergy and East Texas Electric Cooperative's application to transfer ownership of the Hardin County Peaking Facility to Entergy (Project No. 50790).

An unopposed settlement to this transaction was filed Oct. 6, but commissioners questioned how the settlement addressed concerns raised by the intervening parties, which included the Office of Public Utility Council, Texas Industrial Energy Consumers and a group of 25 East Texas cities. The cities do not oppose the settlement, and the other parties support it.

Rather than approving the transaction Jan. 14, the PUC asked the settling parties to justify more clearly how it would be in the public interest, given their previous opposition.

Commissioner Arthur D'Andrea said he is "struggling with" the issue of whether the Hardin County Peaking Facility's transfer to Entergy for a stake in the MCPS is a "mutually beneficial exchange, or is this a transfer of wealth from [Entergy Texas] to ETEC?"

Commissioner Shelly Botkin said, "There's not a lot" in the settlement "that brings comfort or certainty."

PUC Chairman DeAnn Walker said, "We have a company giving up ownership in a very efficient new project to get a less efficient project, and I can see how it's in ETEC's interest, [but] I'm not sure how it's in Entergy's interest."