ERCOT Announces Temporary Contracts to Add Generation during Current Extreme Heat, Drought

Four units returning from mothballed status to help avoid grid emergencies 

The Electric Reliability Council of Texas has executed short-term contracts with two generation owners to activate four “mothballed” units to address emergency situations during the extreme heat and drought, CEO Trip Doggett announced today.

NRG Energy and Garland Power and Light will return two natural gas units each, for a total of approximately 400 megawatts (MW), to be available if needed through October 2011 to reduce the risk of rotating outages across the ERCOT region.

“This has been a highly unusual year for ERCOT with record-breaking temperatures – starting as early as May – plus an increasing demand for electricity as the state’s economy and population growth fuel greater energy use,” Doggett said. 

“In addition, we are facing the worst drought in Texas history.  Without rainfall in the near future, we anticipate increased generation outage rates because of power plant cooling water issues,” Doggett said.  

The temporary contracts are based on the pricing methodology used for reliability-must-run units under the ERCOT market rules.  The payments will be figured on a cost-recovery model, meaning the owners get paid for their fixed costs – staff, maintenance, etc.—as well as a cost for fuel. 

To minimize the impact of this temporary reliability tool on other market participants in the competitive market, the four units will be called on only when necessary to avoid emergencies so the units will not displace units that are on-line and bidding into the market, Doggett said.

“We don’t know if, or how much, these units will be needed, but if needed, the cost will be minor when divided by the 23 million consumers in the region and when compared to the much higher costs and problems from statewide rolling blackouts which these units will help avoid,” Doggett said.

Chairman Donna Nelson of the Public Utility Commission of Texas addressed the urgency of the current situation in an Aug. 12 letter and urged ERCOT to take actions necessary to address the extreme circumstances. 

“The record breaking heat and drought have placed increased stress on the generation facilities operating within ERCOT, increasing the likelihood of the unplanned mechanical breakdown of generation units at a time when our electric demand is soaring,” Nelson said, and directed ERCOT to “look at all available options to ensure the reliability and adequacy of the ERCOT transmission grid at this critical juncture.”

“NRG Energy is pleased to partner with ERCOT to help ensure the electricity needs of Texans are met,” said John Ragan, President of NRG Energy’s Gulf Coast Region. “Through this agreement, we will be able to bring these two units back online to provide additional power to meet the needs of more than 60,000 Texas homes as we face prolonged extreme temperatures.”

“As a member of ERCOT, we want to be responsive to their needs, as well as the needs of the citizens of Texas,” said Ray Schwertner, GP&L’s Electric Utility Director.  “We have mobilized staff and other resources to work around the clock to get the units ready to run when called upon.”

Resources on line:

Letter from CEO Trip Doggett to PUC Chairman Nelson, ERCOT, Aug. 16, 2011

Media Contacts:

Dave Knox, NRG Energy, david.knox@nrgenergy.com
Elizabeth Kimbrough, Garland Power & Light, ekimbrough@garlandpower-light.org
Terry Hadley, Public Utility Commission, terry.hadley@puc.state.tx.us
Dottie Roark, ERCOT, droark@ercot.com