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Texas utility to leave coal plant in mothballs despite tight market

Despite the Electric Reliability Council of Texas Inc. expecting to have the tightest summer planning reserve margin on record in 2019, the Texas Municipal Power Agency notified the grid operator of plans to keep its 470-MW coal-fired Gibbons Creek Generating Station in mothballs indefinitely.

Built in 1983, the plant is in the ERCOT North Hub area in Grimes County near its juncture with the Houston and South hubs.

The Gibbons Creek plant has been in mothball status since October, when operations were planned to resume seven or eight months later, but the city of Garland, Texas, notified ERCOT on Dec. 21 of plans to continue its mothball status indefinitely.

Stakeholders have until Jan. 11, 2019, to file comments on this latest notice of suspension of operations, after which ERCOT may determine whether the plant is needed on a reliability-must-run basis.

Garland was one of four Texas municipalities that had contracted for a portion of the Gibbons Creek plant's capacity, taking 221 MW. The other cities were Bryan, with 102 MW; Denton, with 100 MW; and Greenville, with 47 MW. The contracts, dating from the plant's commercial start 35 years ago, all expired in September.

Plant for sale

Texas Municipal Power Agency, or TMPA, General Manager Bob Kahn said Dec. 26 that the plant remains for sale, which has been the case at least since mid-2017. Kahn said he could not reveal the reasons for TMPA's plans to continue the Gibbons Creek plant's suspension of operations indefinitely as the information is "strategy we just can't discuss."

Municipal utilities associated with the four now-former Gibbons Creek off-takers, plus the Texas cities of Kerrville and New Braunfels, have been soliciting proposals for solar power. Greentech Media reported Dec. 14 that New Braunfels utilities had signed a 15-year power purchase agreement for solar power for less than $25/MWh from the ENGIE SA-affiliated, 255-MW Long Draw Solar facility in West Texas. Denton is taking 75 MW from the Long Draw facility.

"It looks like they are replacing expensive, inefficient coal with solar," said Chrissy Mann, senior campaign representative in Texas with the Sierra Club's Beyond Coal Campaign.

ERCOT's latest capacity, demand and reserves report, issued earlier in December, includes a planning reserve margin for summer 2019 of 8.1%, the lowest on record and well below the 13.75% target reserve margin deemed necessary to maintain reliability. ERCOT entered this past summer with a planning reserve margin near 11%.

On Dec. 21, on-peak July-August forwards settled around $132/MWh, well above the actual day-ahead on-peak average prices for July and August.

"The market is going to do what the market is going to do on a much tighter reserve margin," Mann said Dec. 26. "ERCOT knows how to handle its own market."

Mark Watson is a reporter for S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.