Dallas-based Luminant Seeks to "Suspend Operations" at Martin Lake Power Plant Unit Due to Cheap Electricity Prices

Categories: Biz

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Peter Ryan
Luminant, Texas' largest electricity generator, has applied to "suspend operations" at its Martin Lake coal-fired plant near Tatum. If the request is approved by grid operators, it will result in the loss of 750 megawatts hours, or enough to power about 750,000 homes. A Luminant spokeswoman says the plant would go offline in December and return to operation in June, in time for summer heat and peak demand.

Citing declining wholesale power prices, Luminant says it "does not make economic sense to operate a unit at a financial loss." The move, it added, has nothing to do with environmental regulations. It was a "purely economical decision."

Luminant can ill-afford to suffer further losses. Taken private in the biggest leveraged buyout in history, the purchase of then TXU was a bet on soaring gas prices, which set the marginal price for electricity. The company's fleet of cheaply run (compared to natural gas) coal-fired power plants were, KKR and Goldman Sachs believed, genuine moneymakers in an age of high natural gas prices. Prices, of course, have stabilized at around $3.50 per million British Thermal Units, a fraction of what they were when they buyout guys closed the deal. Now the profit margins on those coal-fired plants are razor thin, to the point that during six months of the year, they lose money.

Energy Future Holdings has suffered quarterly loss after quarterly loss ever since the buyout, paying in interest as much as 60 cents of every dollar it has earned. Its power generating holding company now owes far more than its worth.

In a story Tuesday, Bloomberg reported that EFH's lenders are hashing out a pre-negotiated bankruptcy in which the lenders would reduce the debt in exchange for a bigger stake in the company.

This isn't the first power plant Luminant has partially shut down for the slow winter and spring months. About this time last year, it applied to idle two units at its Monticello coal-fired power plant, taking 1,200 megawatts off the grid. It'll do it again this year. That was all against the backdrop of the fight it was having with the EPA, whose regulations it and Governor Rick Perry claimed would force the company to shut down power plants.

Looks like the market is doing EPA's work for it.

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Can someone explain why this is a bad thing? I can't figure that out. If electricity prices are low, that means that supply is meeting demand just fine. Every coal fired power plant that gets shut down is a win for Texas in just about every metric I can think of.

The only reason to be sad about this is that it seems like it might kill a few dozen jobs at the plant, but it doesn't because the company still has to keep the plant ready to bring back online in the spring. They aren't mothballing it. You can't just fire dozens of highly skilled and technical labor for six months of the year -they might not come back when you are ready to start the guy up again. 

Sotiredofitall topcommenter

Can the state buy it back at a discount and take it all back to "regulated" status?


Yeesh.  Get a proofreader.

holmantx topcommenter

I wonder what we would all be paying if we had kept a regulated electricity market establishing EFH's buy-in basis as the regulated rate?  Falling natural gas prices would nave no benefit to the consumer since a utility charge would be based upon its cost to produce, and in EFH's case it would be the buy-in basis.

De-regulation brought on wind power.  Texas now dwarfs the nation in wind generation.


Goldman Sucks takes a beating? Aw shucks.

holmantx topcommenter

EXTRA ! Richard Windsor Denies Any Wrongdoing!

WASHINGTON (AP) — The Obama administration’s chief environmental watchdog, EPA Administrator Lisa Jackson, is stepping down after a nearly four-year tenure marked by high-profile brawls over global warming pollution, the Keystone XL oil pipeline, new controls on coal-fired plants and several other hot-button issues that affect the nation’s economy and people’s health.

Former Environmental Protection Agency (EPA) Administrator Lisa Jackson used her private email to conduct official business, including with a lobbyist, IN A POSSIBLE VIOLATION OF FEDERAL RECORD LAWS, reports the Dallas Observer (ha! – only kidding.  You guys are stuck on stupid Perry; might want to put some ice on that).

The emails were part of the latest batch of documents released through a Freedom of Information Act (FOIA) request filed by the Competitive Enterprise Institute (CEI). The conservative nonprofit has been digging through Jackson’s correspondence for months after it discovered she used a secret EPA email address under the pseudonym “Richard Windsor.”


Look on the bright side - Climate change means our lakes will fill, and the drought will be over.


@d-may I work in the Power industry and I wonder if your response is a joke? Another Texas plant closing, another loss of over a hundred jobs? Not to mention the township its tax base helps? Close this plant just to satisfy bean counters and liberal EPA terrorists? Natural gas prices are being held down deliberately, almost lulling the EPA directives to convert plants to it. Once power plants shift over to gas...watch natural gas prices sky rocket!  And "they can't just fire Dozens of skilled workers"??? They have in the past and will? Here in Texas we have a great natural fuel called coal/ lignite and with the best technology to date. Yet its not good enough for those who live thousands of miles away in a white house.  I guess we could buy electric from the China?

ThePosterFormerlyKnownasPaul topcommenter


The market is not working because it is sending mixed signals.  To the consumer, the message is that electrical power is cheap and abundant.  To the generator, the message is that there is insufficient capacity.

The problem as I see it is that there is no elasticity in the current market.  That is, the price of electricity is not affected until demand exceeds supply.

The problem is also exacerbated by the fact that all power producers are paid on the basis of the last incremental buy in.  This buy in is what prompted the LBO of TXU as the majority of TXU's generating capacity was lower cost coal and nuclear when compared to the gas fired plants.


holmantx topcommenter


I like the concept.  If the company loses its shirt, fuck 'em.  If they knock a home run . . . fuck 'em.


@holmantx Extra! Holman deploys straw man that is really neither here nor there! Luminant's coal-fired plants undone not by the EPA, but by the low market price for electricity and a hilariously optimistic bet on natural gas resulting in unsustainable debt!


@6actual911 "EPA Terrorists"? Those are some of the nerdiest terrorists I've ever heard of. 

I know it's hard if your drown your brain in hate speech of cable news and talk radio all day, but try to ratchet down rhetoric, will you?

holmantx topcommenter

@MaxNoDifference @holmantx 

Hook 'em up but wait! 

Oh the horror of allowing evile energy companies to build wind generators on parkland.  How unsightly and think of the bird loss.

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