Oil and Gas

Luminant delays Texas Sandow 5 coal unit start-up

HOUSTON, July 20 (Reuters) - Luminant said full operation of its new 581-megawatt Sandow 5 lignite coal-fired unit in central Texas will be delayed until after summer when the state sees its highest annual electric use.

Dallas-based Luminant said the new Sandow unit was synchronized to the grid and produced power in early July, but weather-related construction delays and some equipment malfunctions during initial testing mean the unit will not meet a deadline for commercial operation and emission standards set out in a 2007 court order related to a federal consent decree.

“Sandow Power does not expect that the Sandow 5 unit, operating at full capacity, would meet the required emission rate limits on or before Aug. 31, 2009,” Luminant said in a filing with the Securities and Exchange Commission.

A spokeswoman for Luminant’s parent, Energy Future Holdings Corp, said the unit’s full operation will be delayed “two to three months.”

The Electric Reliability Council of Texas (ERCOT), the state’s primary grid operator, was counting on Sandow 5 to produce power this summer when temperatures rise and power demand for air conditioning soars.

Texas has already set two all-time electric demand records this month as blazing heat and a lack of rain kept air conditioners running for long periods.

Normally, ERCOT sees record demand in August. While no power disruptions were reported, the grid operator cited a high number of plant outages as it called for residents to reduce electric use.

Output from the new Sandow unit also was expected to help offset the loss of more than 2,000 MW of aging, natural gas-fired units that Luminant retired ahead of the summer season.

In its filing, Luminant said it has requested a 59-day extension of the Aug. 31 deadline from parties involved in a 2003 consent order between Alcoa Inc AA.N and environmental groups.

The filing blamed construction delays after Hurricane Ike struck Texas last September and unspecified equipment problems.

“The project’s cost remains on budget and the overall schedule is currently within two to three months of the initial target of mid-year 2009,” the filing said.

The Sandow consent decree allowed Alcoa to build a new power plant near its Rockdale, Texas, smelter operation, to replace two, smaller dirtier coal units. Those units were shut in late 2006.

Luminant became a party to the consent decree when it acquired development rights for Sandow 5. Alcoa has since scaled back the smelter’s operation.

Privately held Energy Future Holdings is owned by Kohlberg Kravis Roberts [KKR.UL], TPG Capital [TPG.UL] and Goldman Sachs GS.N. (Reporting by Eileen O'Grady; Editing by Gary Hill)