HOUSTON Dec 2 Calpine Corp said Monday
it will expand its fleet of power plants in Texas, but delay
construction of two "quick-start" peaker plants until a debate
over electric market reform is settled.
Texas, unlike many areas of the U.S., continues to see
growing demand for electricity but tight financial markets and
low wholesale power prices have stalled construction of all but
a few new plants in the state's primary grid, overseen by the
Electric Reliability Council of Texas (ERCOT).
State regulators have taken a number of steps to encourage
development of new power plants, but a state legislator last
week warned the Texas Public Utility Commission "to slow down"
on proposed market changes.
Houston-based Calpine, which already owns more than a dozen
natural gas-fired power plants in Texas, said Monday it agreed
to buy the 1,050-megawatt, combined-cycle Guadalupe Power plant
near San Antonio for $625 million, or $595 per kilowatt.
Calpine will purchase the plant from MinnTex Power Holdings,
LLC, which is owned by a private investment fund managed by
Wayzata Investment Partners LLC of Minnesota.
MinnTex purchased Guadalupe Power in 2011 for about $350
million, or roughly $343 per kw, from a unit of Public Service
"We strongly believe in the potential of the Texas market as
electric demand increases and reserve margins tighten," said
Calpine Chief Executive Jack Fusco in a statement. "Acquiring
this modern, flexible and efficient plant in ERCOT`s south zone
at a discount to replacement cost furthers our strategic
objectives in this key market."
Calpine said its purchase includes development rights for
new peaking units already being developed by Guadalupe Power "if
market conditions warrant."
Guadalupe Power received an air permit in October for a
470-MW "peaking" power plant to be built at the site and
in-service as early as mid-2015.
Regulators have said the state needs additional peaking
units which can start-up quickly but operate only when needed to
meet rising power demand or to compensate for falling wind
Calpine is already adding 550 MW of capacity at two existing
power plants in Houston to be online by the summer of 2014.
Officials have said those projects will cost about half as much
as new construction.
Calpine and a number of other power plant owners say the
economics of the current Texas market under which generators are
paid only when they produce power does not justify new
Many favor creation of a capacity market as one way to boost
revenue in the state's $29 billion wholesale market while the
state's industrial companies oppose such a change, saying it's
costly and unneeded.
"The peakers are in effect an option to develop additional
new capacity at the same site," a Calpine spokesman said.