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(Corrects headline and recasts first three graphs to drop draft permit)
HOUSTON, Nov 18 (Reuters) - NRG Energy Inc's (NRG.N) plan to build a $1.2 billion pulverized coal unit in Texas moved forward on Wednesday as state regulators adopted a hearing judges' order to allow a third unit at the Limestone power station.
The Texas Commission on Environmental Quality adopted the proposed decision to issue needed permits for a new 800-megawatt coal-fired unit, with some amendments.
Commissioners instructed that the permit be revised before they consider final approval of the order and the permit next month.
Obtaining a final permit later this year "will allow us to work with our partners to move forward with the project," said NRG spokesman Dave Knox.
NRG is working with entities considering taking equity stakes in the project, Knox said, but declined to name any potential partners.
Limestone 3 will be built at the existing two-unit, 1,614-MW Limestone station, located near Jewett in Limestone County, about 120 miles (195 km) northwest of Houston.
TCEQ adopted the judges' proposed decision over the objections of environmental groups and some nearby property owners.
Environmental groups are fighting new coal projects across the United States. In Texas, they are also challenging the state's air-permitting process, citing Texas' ranking as the leading emitter of carbon dioxide, a greenhouse gas blamed for global warming.
Texas utility regulators, however, have cited the need for additional coal-fired plants to reduce the state's dependence on electricity from natural gas, a fuel which has seen wide price swings in recent years.
In September, Dallas-based Luminant, the state's largest generating company, completed the first new coal unit built in Texas in 17 years.
Luminant expects to complete the first of two additional coal units at Oak Grove before the end of the year. Several other coal units are under construction or proposed in the state.
One MW powers about 500 homes in Texas.
NRG, of Princeton, New Jersey, filed requests at TCEQ for an air permit to build the Limestone unit in 2006. A draft permit was issued in November 2007.
NRG owns and operates more than 24,000 MW of generation in the United States and sells power to more than 1.7 million customers in Texas. (Reporting by Eileen O'Grady)