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NRG says ERCOT reserve margins will tighten

Houston (Platts)--3 Aug 2017 504 pm EDT/2104 GMT


NRG Energy said Thursday it is expecting a tightening of the Electric Reliability Council of Texas power market as new plant build delays and cancellations as well as retirements lower the reserve margin in 2018 to a projected 11.3%.

ERCOT's reserve margin as of May 2017 was 18.9%.

In an earnings conference call, NRG Energy CEO Mauricio Gutierrez said that the 12-month average year over year weather normalized demand growth in ERCOT was 2.3%, a growth rate that "outpaces the national average."

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He said that ERCOT's reserve margin is "under continued pressure," and pointed to the new build delay of two facilities and the cancellation of another that had planned conventional capacity of 1,200 MW that had been planned to come online in 2018.

Gutierrez said he anticipates more delays and cancellations in 2019 and 2020.

The NRG CEO put his company's estimate of ERCOT units "at risk of retirement" at between 3,000 MW and 8,000 MW "over the next several years." Gutierrez told an analyst that three coal-fired facilities owned by Dallas-based merchant firm Vistra Energy, which have combined capacity of approximately 5,500 MW, are included in NRG's high-end estimate of 8,000 MW at risk of retirement.

Vistra, which owns the generating firm Luminant, has said publicly that it has under review the economic performance of the three coal-fired units, and their importance to the market.

Of NRG's national total of 30,508 MW of capacity, 10,508 MW are located in Texas. In a "transformation plan" released July 12, the company said it views its wholesale and retail electricity businesses in Texas as its main focus.

NRG and other generators in Texas have suffered low power prices caused by low gas prices and an oversupply of capacity for the past several years.

--Jeffrey Ryser, jeffrey.ryser@spglobal.com

--Edited by Alisdair Bowles, alisdair.bowles@spglobal.com



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