Various officials with and representatives of Entergy Texas Inc. (ETI) supplied rebuttal testimony filed May 13 with the Texas Public Utility Commission as the utility argues for approval to purchase one unit of the four-unit Union power plant in Arkansas.
Other subsidiaries of Entergy Corp. (NYSE: ETR) are working at their own state commissions for approvals to buy the other three units at the plant. Entergy Gulf States, for example, plans to buy two of the four units, called power blocks.
One of those supplying May 13 rebuttal testimony to the Texas commission was Jess K. Totten, a Principal with Stratus Energy Group LLC, testifying on behalf of Entergy Texas.
He wrote: “I am testifying on behalf of Entergy Texas in support of the Company’s position that its acquisition of Power Block 1 (‘PB 1’), a part of the Union Power Station (‘UPS’), is in the public interest and its request for an amendment of its Certificate of Convenience and Necessity (‘CCN’) to permit it to acquire these generating facilities. My Rebuttal Testimony is in response to the prefiled Direct Testimony of Jeffry Pollock and Scott Norwood, who contend that ETI has not compared PB 1 with a sufficiently broad range of resource alternatives. I also respond to Mr. Norwood’s contention that ETI should have conducted a full resource solicitation process in deciding whether to acquire PB 1.”
Pollock, in his testimony on behalf of Texas Industrial Energy Consumers, and Norwood, in his testimony on behalf of the Office of Public Utility Counsel, suggest that ETI is required to examine a broader range of alternatives in this case in order to justify its proposal to acquire PB 1. Pollock testifies that although ETI did a net benefits analysis comparing the acquisition of PB 1 with not acquiring it, this analysis did not study other alternatives. Norwood criticizes ETI for not soliciting other resources or evaluating other alternatives than acquiring PB 1 In addition, Norwood repeatedly asserts that Entergy Texas has not demonstrated that PB 1 is the least cost resource to meet its needs.
Totten wrote: “In addition to the reasons provided by other ETI rebuttal witnesses, the Commission should not require a solicitation or request for proposal (‘RFP’), or its equivalent, in order to approve the purchase, for at least two reasons: (1) the Commission’s rules do not require a solicitation or RFP or any specific process in connection with the acquisition of a major utility asset, and (2) the objectives of issuing and evaluating an RFP have largely been met in the circumstances of this case.”
Totten noted that the current owner of the plant made a very attractive, unsolicited offer to sell the plant to Entergy, which obviated the need for a traditional RFP to be issued to seek new capacity.
Another ETI witness with May 13 rebuttal arguments was Andrew J. O’Brien, the Director, Commercial Operations at Entergy Services. He said the utility will have the transmission capacity to get this power from Arkansas into its system once certain grid upgrades are made, and that there are no real issues with getting those upgrades done.
Entergy says looming power plant retirements mean that new capacity is needed
Stuart Barrett, Director of Resource Planning and Market Operations for Entergy Texas, said in his own May 13 rebuttal testimony that the utility’s load growth projections are sound and fully justify this capacity purchase. He added that the suggestion that in the short term that the company can rely on power purchases off the Midcontinent ISO market in place of the Union capacity is not a good idea.
Said Barrett about how PB 1 can replace its generating units that will eventually be retired: “ETI’s deactivation assumptions are reasonable planning assumptions, not speculation. The majority of ETI’s owned gas-fired generation fleet consists of legacy gas and coal units ranging from 31 to 52 years old. Figure 1 below includes a list of ETI’s owned fleet and the years they went into service. It would not be reasonable to assume that aging units will never be taken out of service, which is the implication of Mr. Pollock’s position. It is not a matter of ‘if,’ it is a matter of ‘when.’ Prudent long-term planning requires that the Company make reasonable assumptions for projected deactivations, including which units will continue to be used within the portfolio and which ones will be removed from service and when. Such planning assumptions provide a basis for assessing the nature of future resource needs with enough lead-time to execute a procurement strategy.”
Those ETI-owned units, their commercial operation year, and years in service are:
- Nelson Unit 6, 1982, 32 years, coal;
- Lewis Creek Unit 1, 1970, 44 years, gas/oil;
- Lewis Creek Unit 2, 1971, 43 years, gas/oil;
- Sabine Unit 1, 1962, 52 years, gas/oil;
- Sabine Unit 2, 1962, 52 years, gas/oil;
- Sabine Unit 3, 1966, 48 years, gas/oil;
- Sabine Unit 4, 1974, 40 years, gas;
- Sabine Unit 5, 1979, 35 years, gas/oil; and
- Big Cajun 2, 1983, 31 years, coal.
Barrett added: “The Company generally assumes a 60-year operational life for solid fuel and steam generators unless evidence suggests a shorter or longer life assumption is appropriate. There are some exceptions to this planning assumption based on investment decisions and the current status of the generator. Historically, some generators deactivate before reaching a 60-year operational life and some after.”
Barrett said about deactivations across the entire Entergy Corp. system: “The average age at deactivation is roughly 58 years. As another example, two of the most recent generator deactivation decisions were for Entergy New Orleans, Inc.‘s Michoud Unit 2 and Unit 3, which were approved for deactivation effective June 1, 2016 by the Entergy Operating Committee and MISO. By June 1, 2016, Michoud Unit 2 will have achieved 53 years of service and Michoud Unit 3 will have achieved 49 years of service, which is longer than many similar units, but far short of a 60-year operational life. Indeed, Michoud 3 had been expected to remain in service for another 5 to 10 years, but the condition of the unit was such that the Entergy Operating Committee determined that a substantially earlier deactivation was appropriate.”
Michoud Unit 2 in Louisiana is a 239-MW facility, while Michoud Unit 3 is at 542 MW, with both operating at intermediate load and both fired by oil and gas, according to a list of Entergy power plants on the company website.
Union plant, built early last decade, has four 495-MW (summer) units
Entergy Texas had applied on Dec. 30, 2014, at the Texas commission for these approvals, The buy would be from Union Power Partners LP. ETI is seeking from the Texas commission:
- An amendment to its Certificate of Convenience and Necessity (CCN) to include Power Block 1 and associated assets and common facilities;
- A determination, via a sales, transfer, merger application (STM), that the Power Block 1 Acquisition is consistent with the public interest; and
- A determination that, for ratemaking purposes, the entire investment to acquire Power Block 1 Acquisition, including transaction costs, is eligible for inclusion in ETI’s rate base.
UPS is located in southern Arkansas on more than 300 acres in Union County. The facility began operation in July 2003 and is comprised of four combined-cycle gas turbine (CCGT) power blocks. Each power block has the same design and capacity rating, which are 495 MW (summer) and 538 MW (nominal).
ETI projects that its owned and contracted capacity will be approximately 22% short of its capacity requirements in 2016 (roughly 900 MW), with a resource deficiency that grows each year thereafter. By 2023, ETI is estimated to be approximately 37% short of its capacity requirement (roughly 1,700 MW). Power Block 1 is well suited for such a supply role because it is reliable, capable of flexible operation, and runs efficiently, the company said. Including Power Block 1 in the company’s generation fleet will reduce ETI’s projected capacity deficit, fulfill an important base-load and load-following supply function and enhance ETI’s current generation fleet with efficient technology.