American Electric Power (AEP) has asked the Electricity Reliability Council of Texas (ERCOT) to determine which of its 16 natural gas-fired power plants in the state’s grid system, which have remained idle for most of this year, have to remain activated. AEP plans to mothball some or all of the Texas power plants by the end of the year if they are not on the state’s “reliability must run” (RMR) list, to boost the company’s bottom line.

The 16 plants have a total generating capacity of 3,866 MW. If all of them were deactivated, AEP said it would have 6,074 MW of active generating capacity in the state, including 2,663 in ERCOT.

Once ERCOT determines which facilities may be mothballed, it would negotiate interim contracts with the Columbus, OH-based utility to ensure cost recovery for those units. With interim contracts, which could be in place by the end of this month, ERCOT would have more time to analyze the state’s long-term needs. RMR plants are required to run to ensure reliability of an electricity grid, even if electricity from that plant is not required to meet market needs. Mothballed plants may be returned to service if market conditions change.

“Many new plants have been built in Texas as a response to deregulation,” said Eric van der Walde, AEP’s executive vice president for wholesale. “These new plants are more efficient and have pushed wholesale power prices lower, which is good for the Texas market. It’s reached a point where we are buying power for a price below the production costs of 16 of our gas-fired plants. The plants have been idle for much of the year, except when called on by ERCOT for reliability purposes.”

A move to close, at least temporarily, the units would prove positive on AEP’s bottom line, van der Walde said. “The interim contracts with ERCOT will allow us to get cost recovery for plants with RMR status,” and operating and maintenance costs would be reduced with mothballing the other plants. “Both steps will enhance our earnings.” Mothballing the plants would have no effect on Texas electricity prices or availability, he said. Also, employees of plants that are moved to inactive status would receive a severance package and outplacement services.

AEP’s West Texas Utilities and Central Power and Light subsidiaries operate all of the 16 gas-fired plants in ERCOT. AEP plants in the Southwest Power Pool (SPP) region of Texas, which are operated by AEP’s Southwestern Electric Power Co. subsidiary, are not affected by the decision because competition has not been introduced in the SPP.

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