ERCOT Announces Temporary Contracts to Add Generation during Current Extreme Heat, Drought

From an ERCOT release today:

Four units returning from mothballed status to help avoid grid emergencies.

The Electric Reliability Council of Texas has executed short-term contracts with two generation owners to activate four “mothballed” units to address emergency situations during the extreme heat and drought, CEO Trip Doggett announced today.

NRG Energy and Garland Power and Light will return two natural gas units each, for a total of approximately 400 megawatts (MW), to be available if needed through October 2011 to reduce the risk of rotating outages across the ERCOT region.

“This has been a highly unusual year for ERCOT with record-breaking temperatures – starting as early as May – plus an increasing demand for electricity as the state’s economy and population growth fuel greater energy use,” Doggett said.

“In addition, we are facing the worst drought in Texas history.  Without rainfall in the near future, we anticipate increased generation outage rates because of power plant cooling water issues,” Doggett said.

The temporary contracts are based on the pricing methodology used for reliability-must-run units under the ERCOT market rules.  The payments will be figured on a cost-recovery model, meaning the owners get paid for their fixed costs – staff, maintenance, etc.—as well as a cost for fuel.

To minimize the impact of this temporary reliability tool on other market participants in the competitive market, the four units will be called on only when necessary to avoid emergencies so the units will not displace units that are on-line and bidding into the market, Doggett said.

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