Vistra (NYSE:VST) CEO Jim Burke took a wait-and-see approach Wednesday to ERCOT’s market redesign that is currently being debated by regulators, legislators and stakeholders, pointing out there are many details yet to be determined.
“I think there’s really a couple concepts we would want to make sure when we get through the stakeholder process,” he told financial analysts during Vistra’s year-end earnings call. “One is, is it material enough to attract investment? And is it enough to retain the generation that’s currently there?”
Attracting new generation and retaining new generation, primarily dispatchable, are the two goals behind the performance credit mechanism (PCM) that the Texas Public Utility Commission has offered up for vetting by the state’s legislature. The construct would reward generators — like Vistra’s Luminant subsidiary — in ERCOT’s energy-only market with credits based on their performance during a determined number of scarcity hours. (See Texas PUC’s Market Redesign Dominates ERCOT Market Summit.)
“I think it’s too early to say what the PCM is going to provide, obviously,” Burke said. “We believe in that dispatchable resource emphasis around PCM. We think that’s core to grid reliability. But there’s too many things to still work out in the stakeholder process.”
Vistra reported year-end adjusted EBITDA from ongoing operations of $3.12 billion, as compared to 2021’s performance of $2.03 billion. The February 2021 winter storm had a largely negative effect on the company’s earnings the year before.
For the quarter, ongoing operations adjusted EBITDA was $771 million, down from the year prior of $1.19 billion.
The company uses adjusted EBITDA as a performance measure because, it says, outside analysis of its business is improved by visibility into both net income prepared in accordance with GAAP and adjusted EBITDA.
While Vistra keeps a keen eye on the PCM and its possible benefit to thermal generation, it continues to transition its generation fleet to lower-carbon resources through investments in solar and battery energy storage developments. It added 418 MW of zero-carbon generation and storage in Texas and retired about 2.9 GW of fossil units in Ohio and Illinois.
The company plans to add 350 MW to its Moss Landing battery storage project in California. That will increase the facility’s capacity to 750 MW.
Vistra’s share price closed down 28 cents Wednesday at $21.71 after briefly reaching $22.41 following the earnings release.
