The coal-fired power plant Denton co-owns with three other cities will be mothballed indefinitely, now that the state’s power grid officials have agreed.
But that also means the state’s power grid is heading into the summer with a different mix of electrical generation than it had last year — and those conditions could test Denton’s local hedge against price spikes in keeping electric bills low.
Denton Municipal Electric’s general manager, George Morrow, said the Texas Municipal Power Agency has no intention of operating the Gibbons Creek coal-fired power plant this summer. Denton owns the plant together with the cities of Garland, Greenville and Bryan.
The plant near Bryan sat idle over the past two winters but made electricity last summer. That won’t happen this summer under the mothball status.
“We need at least six months’ notice to restart,” Morrow said.
For now, there are no plans to begin the expensive process of decommissioning the coal plant, Morrow said.
The Electric Reliability Council of Texas included that loss of generation when it forecast the summer electric market in December. The forecast will be updated this month.
But, Morrow said, grid officials already have responded to those tighter market conditions by raising the cap of how much electricity can trade for this summer. That action, in and of itself, affects the marketplace. For example, the city of Garland is taking the Spencer gas-fired power plant in Denton out of mothball status and will be available to run this summer.
Denton sold the plant on Spencer Road to Pacific Gas and Electric in 2001. Garland bought the plant from PG&E in 2003.
That also means this summer could put DME’s hedge against high electricity prices to the test, including its renewable energy contracts and its own trading group and power plant.
Denton’s new gas-fired power plant, the Denton Energy Center, has been running since July. The plant’s gross revenue from July to December was about $15.2 million, with more than half of that earned in July, according to city records.
Gross revenue each month varies widely, from a low of $340,000 in December to July’s high of $8.2 million. Morrow says DME continuously monitors the state’s electric market to make and sell electricity when it makes economic sense.
Some of the power plant’s value comes not from making and selling electricity but from the city’s ability to leverage renewable energy contracts at the lowest possible price. However, the city also issued about $250 million in bonds to pay for the Denton Energy Center. Last year, city leaders received a revised estimate for the new power plant’s costs and earnings, which show the plant may not sell enough electricity to cover its fixed costs, including the debt payments when they begin next year.
Beginning in the 2019 fiscal year and for the next 25 years, DME must pay about $17 million per year in debt service on the power plant.