The retirement of existing capacity, including potentially two units at the Willow Glen plant, help justify the proposed acquisition by Entergy Gulf States Louisiana LLC (EGSL) of gas-fired capacity at the Union Power Station (UPS) in Arkansas, said company representative Anthony P. Walz in July 31 testimony filed at the Louisiana Public Service Commission in support of that purchase.
Walz wrote that two of EGSL’s generating units, Willow Glen 2 and 4, are candidates for deactivation at a time that is redacted from the public version of that filing. “These units are 51 years old and 42 years old, respectively, and to continue operating them would require signicant sustainability investment,” he wrote about the two Willow Glen units. “If deactivated, these units would increase EGSL’s capacity need by approximately 700 MW. I note that the decision to deactivate these units must be made by the Entergy Operating Committee; however, given the age and condition of these units, it is important from a planning perspective to recognize that the units may require deactivation.” Current resource planning assumes those units will be deactivated, he added.
A power plant list on the Entergy Corp. (NYSE: ETR) website shows Willow Glen, located at St. Gabriel, La., as a five-unit plant, with Unit 2 (195 MW) and Unit 4 (470 MW) both fired by oil and natural gas. The other units at the plant are Unit 1 (152 MW, gas/oil), Unit 3 (450 MW, gas), and Unit 5 (485 MW, gas/oil).
Entergy Gulf States Louisiana needs additional base load and core load following resources. Compared to its planning requirement, the company’s owned and contracted capacity sources are about 1,300 MW short of its combined base load and core load following resource need in 2016, increasing to 2,300 MW short by 2023.
Walz also touched on a recent decision by another Entergy Corp. operating company, Entergy Texas Inc. (ETI), to withdraw its application for approval at the Texas Public Utility Commission of a buy of another unit at the Union plant.
Entergy on July 17 announced that its Texas utility was giving up on plans to purchase a 495-MW unit at the UPS. Instead the unit will be acquired by Entergy New Orleans (ENO), at an unadjusted purchase price of $237m, subject to the approval of the New Orleans City Council and the satisfaction of certain other conditions.
The Union Power Station is a 1,980-MW (summer rated) facility that entered commercial service in 2003 and consists of four combined-cycle natural gas-fired generating units, called Power Blocks (PBs) 1-4. Entergy announced in December 2014 that three of its subsidiaries, Entergy Texas, Entergy Arkansas, and Entergy Gulf States Louisiana, had entered into an asset purchase agreement to each buy a portion of the Union Power Station.
Entergy Gulf States Louisiana applied on Jan. 13 at the Louisiana commission for approval for it to buy two of the four power blocks. The buy would be from Union Power Partners LP (UPP). The two power blocks that EGSL seeks to acquire would provide about 990 MW (summer rating) of combined-cycle gas turbine (CCGT) capacity and energy. Once acquired, EGSL was to sell to Entergy New Orleans 20% of the output of the two power blocks on a life-of-unit basis pursuant to Service Schedule MSS-4 of the Entergy System Agreement.
“Based on developments in ETI’s Certificate of Convenience and Necessity (‘CCN’) filing to acquire UPS PB1, ETI indicated that approval for PB1 was not likely to be obtained and, accordingly, ETI intended to file a motion to withdraw its CCN filing at the Public Utility Commission of Texas,” Walz wrote in the July 31 testimony. “In addition, EGSL indicated that, should the contractually contemplated contingent allocation to EGSL occur, based on positions taken in EGSL’s filing for approval of the purchase of UPS PB3 and PB4 and related assets, it was unlikely that EGSL would be successful in obtaining the required Louisiana Public Service Commission approval for the contingent purchase of PB1 within the time frame required to avoid the purchase price adjustment provided for in the Asset Purchase Agreement (‘APA’). In light of these developments, the Entergy Operating Committee concurred with ETI’s withdrawal of its CCN filing for PB1 and approved ETI no longer pursuing approval of acquisition of PB1. Moreover, in light of these developments, the Entergy Operating Committee determined that it should reconsider the October 2014 decision that EGSL would be the contingent purchaser of PB1.”
Walz says recent evaluations justify Entergy’s own, 923-MW St. Charles project
Walz added in the July 31 filing at the Louisiana commission: “In May 2015, Entergy Services, Inc. (‘ESI’) concluded its evaluation of proposals submitted in response to the 2014 Amite South Request for Proposals (‘RFP’), which solicited developmental resources capable of serving the needs of EGSL, [Entergy Louisiana] and [Entergy New Orleans]. As part of that RFP, [Entergy Services] considered a self-build generation alternative, the St. Charles Power Station (a CCGT facility with an expected summer rating of 923 MW). After considering the results of the RFP, the Entergy Operating Committee elected to proceed with the self-build alternative and elected not to move forward with any other proposal. An Entergy Operating Committee decision was required regarding the participation in the St. Charles Power Station. The Entergy Operating Committee determined that reallocation of PB1 and allocation of St. Charles Power Station should be determined at the same time because both are long-terrn CCGT resources that were to be allocated between ELL, EGSL and ENO. Thus, the decisions on each resource were intertwined and the allocation rejects the assumption that both transactions would proceed. That is, ENO would acquire PB1, and ELL/EGSL would proceed to construct the St. Charles Power Station.”
St. Charles will be a combined-cycle project to be built on land adjacent to the existing Little Gypsy power plant in Montz, La. It will be about 30 miles from New Orleans and located along the Mississippi River industrial corridor.
Walz said that the reallocation of UPS capacity eliminated Entergy New Orleans’ purchase of 20% of the capacity and energy output from UPS PB3 and PB4 so that both those power blocks are allocated to EGSL in their entirety. Also, Entergy New Orleans is now the purchaser of PB1, which is memorialized in an amendment to the asset purchase agreement (APA) that assigns ETI’s rights, liabilities, and interest in the APA to Entergy New Orleans. The Entergy New Orleans acquisition of PB1 is subject to approval of the Council of the City of New Orleans and certain other conditions.
Walz noted that Entergy New Orleans’ projected capacity and energy position — taking into consideration the planned deactivation of Michoud Units 2 and 3 in 2016 — justifies the allocation of an entire UPS power block; and ELL/EGSL’s projected capacity and energy position justifies the allocation of two full UPS power blocks.
The Entergy power plant list shows that Michoud, located at New Orleans, has only two units – Unit 2 (235 MW) and Unit 3 (529 MW) – both of which are fired with gas and oil.
The recent analyses done by the company, Walz added, reflect the following resource additions and deactivations that are consistent with current resource plans for each Entergy utility:
- ELL/EGSL adds combustion turbine (CT) capacity within West of the Atchafalaya Basin (WOTAB) by 2020 (~500 MW);
- ELL/EGSL adds a combined cycle gas turbine (CCGT) within WOTAB in 2021 (~900 MW);
- Willow Glen Units 2 and 4 are deactivated in a redacted year;
- Entergy New Orleans adds CT capacity with Amite South by 2019 (~250 MW); and
- Michoud Units 2 and 3 are deactivated in 2016, which has been approved by the Entergy Operating Committee.
There was also companion July 31 testimony from Entergy’s Joshua B. Thomas. He noted how recent events have provided clarity that the assumed purchased power agreement pursuant to which Entergy New Orleans would purchase 20% of the capacity and energy output of Union Power Station Power Blocks 3 and 4 on a life-of-unit basis will not become effective. As a result, EGSL will retain 100% of Power Blocks 3 and 4 as contemplated in EGSL’s application and supporting testimony. “I am providing this Testimony to emphasize that my Direct Testimony and Rebuttal Testimony, which outlined the rate effects associated with the Company’s acquisition of UPS Power Blocks 3 and 4, remain valid after considering that the LOU MSS—4 PPA will not become effective,” Thomas wrote.
Entergy Corp. said about the matter in its Aug. 6 quarterly Form 10-Q filing at the SEC: “In July 2015, Entergy Texas, together with other parties, filed a motion with the PUCT to dismiss Entergy Texas’s CCN application to acquire one of the four 495 MW power blocks at the Union Power Station. On July 30, 2015, the PUCT granted the motion to dismiss the CCN case. The power block originally allocated to Entergy Texas will be acquired by Entergy New Orleans, subject to City Council approval and the satisfaction of other conditions to close the transaction, for approximately $237 million. The acquisition by Entergy New Orleans would replace the power purchase agreement with Entergy Gulf States Louisiana that the City Council approved in June 2015. Entergy New Orleans will file an application for authorization to proceed with the acquisition and plans to seek City Council resolution by a date that would support closing the transaction by the end of 2015.”