ERCOT approves $54 million plan to move CenterPoint’s mobile generators to San Antonio

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Texas’ main grid operator on Tuesday approved a $54 million plan to replace two aging natural gas-powered plants near San Antonio with the massive mobile generators that CenterPoint Energy came under fire for not deploying in the wake of Hurricane Beryl in July.

Under the plan, 15 mobile generators currently leased by CenterPoint will be moved from Houston to San Antonio this summer. Customers across the state grid will pay the estimated $54 million cost to move, connect and operate the diesel-fueled generators.

The Electric Reliability Council of Texas board unanimously approved the agreement on Tuesday after San Antonio’s municipal utility, CPS Energy, said in March that it planned to retire three of its gas-powered units at the Braunig Power Station this year. Each of those units is roughly 60 years old — decades older than gas-powered plants are typically built to last.

ERCOT said that the loss of those units, which sit near a problem area in the state’s transmission infrastructure, would increase the risks of power outages across the grid. Transmission capacity has not kept up with an increasing demand for power in North Texas, causing a bottleneck in the San Antonio area where the risk of overloaded lines and widespread outages increase when wind and solar power from South Texas come pouring in.

In December, ERCOT agreed to reimburse the utility $50 million to keep one of the three units, Braunig 3, running.

Tuesday’s decision allows the other two units, Braunig 1 and 2, to be retired this year. Their capacity will be replaced by CenterPoint’s large mobile generators, each of which provide around 30 megawatts of generation. (ERCOT estimates that one megawatt can power around 250 homes.)

“This is a solution to bridge that gap, to lower that chance of load shed,” or rolling outages, Bill Flores, chair of the ERCOT Board of Directors, said Tuesday. “Load shed has a severe cost. We’re trying to avoid that, but you have to spend money, essentially, for insurance to avoid that.”

CPS Energy, San Antonio’s utility, is working on expanding transmission infrastructure to address the bottleneck, but that project will take years to complete. State regulators and lawmakers are also focused on how to build out transmission to address increasing demand for power across the state.

CenterPoint committed to releasing the mobile generators to ERCOT for two years, during which ERCOT could deploy the generators during grid emergencies. ERCOT said it would continue to evaluate updates to transmission infrastructure that could allow it to end its lease of the generators sooner.

ERCOT’s analysis showed that taking on the generators was more cost-effective than maintaining the power plants, which would cost $59 million. The agency sought out alternative proposals to replace the plants, and rejected the only plan it received — a battery storage project — for failing to meet its requirements.

Flores said that the plan would increase Texans’ average monthly electricity bills by 0.4% — a fraction compared to the costs of a widespread outage due to a transmission overload. ERCOT noted that the actual costs of the plan could end up being higher than estimated.

“$54 million is a boatload of money,” Flores said, “but it’s four tenths of a percent on an average bill, and that is offsetting a much higher cost of a load shed event.”

CenterPoint came under fire by state lawmakers and the public for not deploying the generators in its response to Hurricane Beryl, which left millions in Houston in the dark for days.

The Public Utility Commission had allowed CenterPoint to increase its customers’ electricity bills to help pay the $800 million needed to lease and profit from the massive generators.

But CenterPoint did not use the generators in its Beryl response, leading to calls out of the Legislature for regulators to bar the company from passing the costs of the generators onto its customers.

CenterPoint defended its investment, saying the generators — which could not be easily moved to critical facilities needing power — were meant to help in a situation like Winter Storm Uri in 2021, when days of freezing weather caused a statewide power generation failure, rather than outages caused when Beryl sent trees and limbs crashing onto thousands of power lines.

In agreeing to release the generators, CenterPoint will forgo the profits it would have earned on them. Jason Ryan, executive vice president of regulatory services and government affairs at CenterPoint, said the company will ask the PUC to stop charging its customers for the generators.

Some grid experts criticized ERCOT’s plan as both unnecessarily expensive and insufficient.

Instead of spending tens of millions to maintain one aging power plant and operate the massive generators, energy consultant Doug Lewin argued that targeted investments in battery storage near San Antonio would provide greater reliability at lower costs.

“We’re talking about way more than $100 million in ratepayer money — all to maintain an inadequate status quo for two years, ultimately with nothing to show for it,” he wrote in his newsletter, Texas Energy and Power. “Arbitrarily building a portfolio of zombie power plants — at huge expense to ratepayers — when better alternatives are clearly and obviously available, is, to put it mildly, not something ERCOT should be doing.”

The plan also raised concerns among regulators that the diesel-fueled generators would not qualify for needed air emissions permits. ERCOT was working with the Texas Commission on Environmental Quality to address the issue, such as by securing an agreement for more discretionary enforcement.

“This is a fairly limited use case that we expect may justify some sort of special permitting approach,” Nathan Bigbee, ERCOT’s chief regulatory counsel, said Tuesday.

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