By Tom Kleckner
AUSTIN, Texas — Appearing before the Gulf Coast Power Association’s Fall Conference last week, Texas Public Utility Commissioner Brandy Marty Marquez was asked about the retirement decisions facing owners of out-of-market coal plants.
“Everyone’s waiting for that shoe to drop,” she responded.
On Friday, the first pair hit the floor when Vistra Energy announced plans to retire three aging coal-fired units in East Texas. The Monticello units date back to the 1970s and have a capacity of 1,880 MW, rendered obsolete by ERCOT’s record low prices.
Vistra CEO Curt Morgan blamed the market’s “unprecedented low power price environment” as having “profoundly impacted” the plant’s operating revenues. He said the market, flooded with cheap renewable energy and low-cost gas generation, “no longer supports continued investment.”
Morgan alluded to the coming retirement announcement when he told the GCPA his company was “assessing the viability of our generation fleet.”
“We are willing to lead in this area, although we believe we are not the only ones who need to undertake some hard decisions,” he said.
Vistra’s decision was not unexpected. Executives told financial analysts in August it was considering retiring some of its coal plants and would make a decision in the fourth quarter. (See Analysts Debate Potential Vistra Coal Retirements.)
Luminant, Vistra’s generation arm, has two other 1970s-era coal-fired plants in Big Brown and Martin Lake. The plants, with 3.7 GW of capacity, have combined capacity factors of 59% and 52%, respectively. Luminant’s 18 GW of capacity includes 8 GW of coal-fired generation and 7.5 GW of gas.
The Monticello units began life as a lignite mine mouth operation, but they switched to Powder River Basin coal in 2016.
Luminant filed a suspension-of-operations notice with ERCOT that triggered a reliability review. If the ISO determines the units are not needed for reliability reasons, Luminant expects to stop plant operations on Jan. 4, 2018.
Vistra estimates it will record one-time charges of approximately $20 million to $25 million in the third quarter of 2017 related to the retirement, including employee-related severance costs. Luminant has estimated the closure will affect about 200 employees.
ERCOT has also received suspension notifications for three smaller gas-fired units.
The City of Garland told ERCOT on Oct. 2 it plans to indefinitely suspend operations of two of its Spencer plant’s units, totaling 118 MW of capacity, in January. The units went into service in 1966 and 1973.
On Sept. 27, Talen Energy said it plans to retire a 330-MW gas unit at its Barney Davis plant near Corpus Christi in December. The unit went into service in 1974.
