TXU Power announced Friday that it will reduce its operating gas-fired power generation fleet in Texas by 25% through another wave of power plant closings. The company said it would mothball eight older and inefficient natural gas-fired plants, representing about 2,516 MW of generating capacity.
“Mothballing these eight units is the latest step in TXU Power’s ongoing efforts toward achieving industry leading performance in electric generation,” said Richard Wistrand, TXU Power senior vice president of fossil generation. “The units are more than 30 years old and most have run less during the past two years because newer power plants are more cost efficient to serve market demand. A robust competitive wholesale electric market will continue to provide Texas with an ample power supply, and we will continue our excellent history of providing dependable electric power.”
The plants being mothballed have been running at low load factors and TXU said it expects to save about $14 million annually from their shut-down. Additional operations adjustments across TXU’s natural gas-fired generation fleet are expected to reduce annual expenses by about $6 million, for a total annual savings of $20 million. The plant closings and operational adjustments will claim the jobs of about 90 employees, including 75 at the plants being mothballed, TXU said.
“TXU Power must appropriately adjust staffing levels as older units operate less due to new transmission lines, new generation and other factors,” Wistrand said. “The changes are necessary to ensure TXU Power remains competitive, highly dependable and flexible to meet the needs of the market.”
This latest announcement regarding TXU’s gas-fired generation is the second this year. In March, eight other TXU generating units with a capacity of 653 MW were retired. Three additional units, with a capacity of 443 MW, were mothballed and one unit with a capacity of 375 MW is operating under a “reliability must run” (RMR) contract with ERCOT.
The savings from the continuing reorganization are included in TXU Corp.’s previously disclosed outlook for operational earnings(a) for 2005 of $5.65 to $5.85 per diluted share of common stock.
Most of the units in the latest announcement were built in the 1960s, and two were built in 1959. They include three units at the Valley plant in Fannin County (1,115 MW); three units at the North Lake plant in Dallas (715 MW); and two units at the Morgan Creek plant in Mitchell County (686 MW).
TXU Power said it will contact Electric Reliability Council of Texas (ERCOT) officials to discuss the decision to mothball the units. ERCOT may request that any of the units continue operating based on an assessment of grid reliability requirements. Once mothballed, the generating units also could be restarted if market conditions made it economical to operate them, TXU said.
TXU recently began studying the economics of re-powering various generating units in the fleet to meet future needs for more efficient generating capacity. Re-powering could mean replacing existing steam units with combustion turbines, switching some units to burn coal or implementing other options. The studies will examine many factors and it is uncertain when these studies will be complete, the company said.
TXU Power owns and operates over 18,300 MW of generation in Texas, including 2,300 MW of nuclear-fired and 5,837 MW of lignite/coal-fired generation capacity.
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