Texas power plant obtains permit as developers await PUC action

HOUSTON Thu Oct 3, 2013 10:48am EDT

HOUSTON Oct 3 (Reuters) - Texas environmental regulators issued an air permit for a new quick-start, natural gas-fired power plant, the first to be permitted as the state's electric supply struggles to keep pace with a growing economy.

The Texas Commission on Environmental Quality issued an air permit on Wednesday to Guadalupe Power Partners LP for a 470-megawatt, "peaking" power plant to be built outside San Antonio in Guadalupe County.

The simple-cycle gas units are planned at an existing 1,070-MW, combined-cycle gas plant which has been operating since 2001.

The new generation could be online in mid-2015. The project is also working to obtain a greenhouse gas permit from the Environmental Protection Agency.

The so-called peaking plant - which can start-up quickly but operates only when needed to meet rising power demand - is one of about 10 similar generation projects totaling 4,200 MW under development in Texas'primary grid, overseen by the Electric Reliability Council of Texas (ERCOT).

Other companies have obtained or are seeking permits to build another 8,200 MW of combined-cycle generation in ERCOT, according to Reuters data.

While the proposed plants could potentially add more than 12,000 MW of new supply, it is unclear how many will ever advance to construction due to low wholesale prices that make it difficult for developers to obtain financing.

For the past two years, the Texas Public Utility Commission (PUC) and ERCOT have taken steps to improve wholesale price signals, but developers and others say more changes are needed.

The PUC is looking at several options to increase wholesale prices to attract new generation.

Currently, Panda Power Funds, Calpine Corp and the Lower Colorado River Authority are constructing 2,800 MW of additional gas-fired generation in ERCOT, but most developers are waiting for the PUC to act before committing to build new projects.

Guadalupe Power Partners is owned by Minnesota-based Wayzata Investment Partners and managed by Navasota Energy, a private Houston-based company which built, operated and sold two 550-MW gas plants in Texas. A third Navasota Energy project obtained permits but was never built.

An affiliate of Wayzata Investments entered the Texas power market in 2011 when it purchased the existing Guadalupe gas-fired plant from PSEG Power.

Guadalupe Power Partners declined to comment on the permit Wednesday.

The project has completed studies necessary to connect to existing transmission infrastructure.

According to the state permit, the Guadalupe project will utilize one of four combustion turbine models made by General Electric or Siemens.