ERCOT Greenlights Temporary Shutdown Of Power Plant As TXU Weathers Financial Doldrums

By Brantley Hargrove Wed., Oct. 31 2012 at 2:40 PM

Categories: Biz

Peter Ryan

Electricity is so cheap right now that for some generators it doesn't even pay to make it. At the end of August, Dallas-based Energy Future Holdings, the former TXU, announced it would mothball two units at its Monticello coal-fired plant for six to seven months. ERCOT, the state's grid manager, gave Energy Future its blessing Tuesday, concluding that the lost megawatts would not threaten the reliability of the grid. We will get by.

These are hard times in the electricity business. The price of a kilowatt-hour is pretty cheap, and ERCOT says that's just the problem. Not so long ago, it was the conceit behind the deregulation of Texas electricity: Competition drives prices down. Instead, those prices are eroding power reserve margins because generators say they aren't making enough money to build new power plants. Meanwhile, Texas consumes more and more electricity.

Regulators doubled the price cap for electricity again last week, but it won't go into effect soon enough for beleaguered generator Energy Future. For now, we can get along without its power plant, but it wasn't long ago that we thought we'd lose it anyway. The company drew a line in the sand over EPA regs intended to reduce the emission of pollutants like nitrogen oxide, sulfur dioxide and fine particulate matter -- compounds that are harmful to your lungs and heart. The rule would have fallen hard on Energy Future's aging coal-fired fleet, requiring costly retrofits.

It all came at a bad time for Energy Future. The company has logged big net losses almost every quarter since a couple of private equity firms and financiers bought it in the biggest leveraged buyout in history. It was basically a gamble on the high price of electricity because, you know, like housing it can go nowhere but up. Now analysts believe Energy Future is "technically insolvent." In the quarterly report released yesterday, it announced a $407 million third-quarter loss.

Its generating arm, Luminant, and Texas Attorney General Greg Abbott took the EPA to court and won a split decision from a three-judge panel, staving off new regulations. It may be a temporary victory, though, because EPA is requesting a rehearing from the entire federal appeals court. Which is to say, if Energy Future isn't bluffing, it may still mothball those units permanently.

Tags:

Energy Future Holdings, EPA, ERCOT, Luminant, Texas electricity

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Sotiredofitall topcommenter

Can we get that list of elected officials who approved this cluster?

If it's bankruput, can't the state buy it back at a discount?

ThePosterFormerlyKnownasPaul topcommenter

@Sotiredofitall It will most likely go to the bondholders ...

ThePosterFormerlyKnownasPaul topcommenter

How's that deregulation working for you ...

c0tt0n

@ThePosterFormerlyKnownasPaul It's working out great for me. Low electrici bills, and I made a bundle on TXU stock before the buyout. About the only people complaining seem to be the ones not smart enough to shop around for better rates.

I figure I work less than five minutes a day to pay my electric bill. Considering the value I get from electrical service that's got to be the biggest bargain in the world.

ThePosterFormerlyKnownasPaul topcommenter

@c0tt0n OK, we will overlook the fact that from the beginning of the electrical market deregulation until about 2008/2009, Texans were paying above average rates for electricity.

Right now, this "market" is sending mixed messages. ERCOT is saying that we have insufficient reserves. Power resellers are giving it away which indicates a surplus of power or excess capacity. So which is it? Insufficient reserves or excess capacity?