FERC grants break for NRG’s troubled Gregory cogen plant in Texas

The Federal Energy Regulatory Commission on Dec. 13 granted an Oct. 7 request by NRG Energy (NYSE: NRG), on behalf of Gregory Power Partners LLC, for a temporary waiver of qualifying facility (QF) operating and efficiency standards for cogeneration facilities for calendar years 2016 and 2017.

Gregory owns a 473-MW (net) gas-fired topping-cycle cogeneration facility located in Gregory, Texas, that was initially certified as a QF in 1999 and was recently self-recertified as a QF. Steam from the QF was sold to Sherwin Alumina Co. LLC under an Energy Services Agreement to be used in an adjacent bauxite processing plant and also for Sherwin Alumina’s own turbines to produce electricity. Gregory has also sold excess energy that was not utilized by Sherwin Alumina into the Electric Reliability Council of Texas wholesale market. It did not have a power purchase agreement with any utility off-taker.

FERC noted in the Dec. 13 approval: “Gregory states that it has continuously satisfied the operating and efficiency standards during its operating history, but for reasons beyond its control, i.e., Sherwin Alumina’s decision to cease operation of its manufacturing facility and to file for bankruptcy, Gregory now anticipates that the QF will not be able to satisfy these standards for up to a two-year period. Gregory explains that Sherwin Alumina filed for bankruptcy on January 11, 2016, and subsequently on August 1, 2016, Sherwin Alumina announced the manufacturing facility’s shutdown. On September 19, 2016, Sherwin Alumina stopped taking steam from Gregory’s QF. On September 28, 2016, Sherwin Alumina filed a motion in the bankruptcy court to reject the Energy Services Agreement.

“Gregory states that it is working to secure additional steam hosts to replace the steam offtake capacity that Sherwin Alumina unexpectedly stopped taking. Gregory also asserts that the Sherwin Alumina site is a valuable industrial site and port location, which has the potential to be repurposed with another industrial facility that requires steam. Gregory submits that the requested waiver is necessary to provide adequate time to find replacement steam hosts. Gregory states that its request for waiver of the operating and efficiency standards is timely, of limited duration, due to unexpected events outside of its control, provides substantial public benefits, and is consistent with the goals of achieving energy savings contemplated by the Public Utility Regulatory Policies Act of 1978.”

Said the FERC ordere: “Gregory’s request for waiver of the cogeneration operating and efficiency standards for the calendar years 2016 and 2017 is granted pursuant to section 292.205(c) of the Commission’s regulations.”

Filed Nov. 22 at the bankruptcy court for Sherwin Alumina Co. LLC was a deal with Gregory Power Partners LLC that would protect for the time being the operations of the Gregory cogen plant. The deal is among Gregory Power Partners (GPP), Corpus Christi Alumina LLC (CCA) and Sherwin Alumina. GPP operates this cogen in Gregory, Texas, on real property owned by the bankrupt Sherwin companies. GPP holds a leasehold interest on this real property pursuant to an Energy Services Agreement, dated as of June 1998. GPP also claims to hold, with the bankrupt companies disputing such claims, certain easements on and to real property adjacent to the Gregory Power Plant that is also owned by the debtors pursuant to an Amended and Restated Master Easement Agreement effective as of June 1998.

On Jan. 11, 2016, the debtors filed chapter 11 cases before the U.S. Bankruptcy Court for the Southern District of Texas. At the end of September, the bankrupt companies shut their Gregory alumina plant. GPP said that Sherwin’s actions were endangering operation of the plant, which sold steam and some electricity to the Sherwin plant, with most of its electricity output sold to the grid.

Under the deal filed with the court on Nov. 22, the parties reserve their rights as far as future legal disputes, but agreed to take actions in the meantime to facilitate the continued operation of the Gregory Power Plant by GPP and production of electrical power for the Texas public grid by GPP, at the power producer’s sole cost and expense.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.