All posts by Brad Watson

Texas Observer Fails Reporting 101 with Self-Bonding Stories


ELuminant_logo_sm300x189very college-level basic reporting course teaches this fundamental of journalism: get both sides of the story. But the Texas Observer gets an F for blatantly ignoring that standard in recent stories on mine reclamation self-bonding in Texas.

Luminant, the largest coal mining company in Texas, is prominently mentioned in the lead story and even attacked by a longtime environmental activist, who, as usual, is wrong. But did the Texas Observer bother to contact us for our side of the story?

No.

And that’s beyond sloppy journalism. It’s unfair and irresponsible.

In the opening paragraphs, Texas Observer reporter Naveena Sadasivam, mistakenly describes the process Luminant followed to transition from bonds backed by the company’s demonstrated financial condition, or self-bonding, to a collateral bond to secure reclamation costs upon entering bankruptcy as required by the Railroad Commission of Texas. She wrongly implies it was impulsive and chaotic. It wasn’t.

If she contacted us, Sadasivam could have avoided these errors:

  • Energy Future Holdings and Luminant didn’t file for bankruptcy in “mid-2014.” It was in April, 2014.
  • Regulators didn’t “suddenly” have a problem. Months prior to the filing, we consulted the RCT regarding an approach for replacing our self-bonding in the event of a bankruptcy and RCT explained to Luminant what was expected under the rules for an orderly process.
  • There was no “strong-arming.” Well before filing, Luminant understood the regulatory requirements regarding bonding during a restructuring process and was committed to full compliance with those regulations. In consultation with the RCT, the company methodically arranged for a collateral bond secured by $1.1 billion in debtor in possession financing the bankruptcy court approved three days after filing. The RCT then unanimously approved.

Since before we filed for bankruptcy, Public Citizen’s Tom Smith has made misleading claims Luminant might not meet its reclamation obligations. He was wrong then and he’s wrong now suggesting we weren’t committed and able to cover them.

The facts, oblivious to the Texas Observer, back up that commitment. For more than 40 years, Luminant has set the standard in mined land reclamation, restoring nearly 80,000 acres, planting over 38 million trees and creating or enhancing more than 5,100 acres of wetlands, ponds and stream channels. In 2015, Luminant reclaimed more than 2,300 acres and planted over 1 million trees. More than 1,500 acres were reclaimed in 2014 and 1.5 million trees planted.

As an enthusiastic media partner of the environmental activists’ agenda to end coal generation, which the state relies on, and throw thousands of Texans out of their jobs, the Texas Observer has buried the solid fundamentals of good journalism. So these words, literally buried in its website, now ring hollow, “Our reporting is fair, accurate, and, as our mission states, it hews hard to the truth as we find it.”

As Peak Demand Keeps Rising in ERCOT, Records Fall

Powering Texas through the hot summer season


Lamar Power Plant, Luminant’s Combined-Cycle Natural Gas Plant

Lamar Power Plant, Luminant’s Combined-Cycle Natural Gas Plant

With the August heat above 100 degrees and covering much of Texas this week, the Electric Reliability Council of Texas set another record for peak power demand on Thursday between 4-5 p.m. of 71,197 megawatts. The previous record of 71,043 megawatts had just been set one hour earlier (between 3-4 p.m.). The new peaks set on Thursday blew past 71,000 megawatts for the first time and beyond the records set on Wednesday and Monday of this week.

To give you an idea of how much generation that is, one megawatt can power 200 homes in periods of high demand.

On these hot days when demand is at its highest, where does all that power come from?

ERCOT manages the flow of electric power to 24 million Texas customers, representing 90 percent of the state’s electric load. Luminant is the largest power generator in ERCOT.

The ERCOT grid relies on a diverse mix of energy sources that when all pulling together provide the power for this growing state. Here’s a breakout from ERCOT of which energy sources provided the power when Texans needed it most when Monday’s record was set:

  • 57% natural gas (includes combined cycle as well as traditional steam and combustion turbines)
  • 27% coal
  • 8% wind
  • 7% nuclear
  • 1% other (hydro, renewables, diesel)
    Note: Percentages are rounded
Forney Power Plant – Luminant’s Combined-Cycle Natural Gas Plant

Forney Power Plant – Luminant’s Combined-Cycle Natural Gas Plant

These numbers also underscore the importance of dependable power generation from natural gas, coal and nuclear energy.

Over the record peak hour on Monday, Luminant’s coal and gas plants and Comanche Peak Nuclear Power Plant helped supply nearly 15,000 megawatts to the grid.

“We strive for operational excellence, and on days like we’ve had this week, we’re reminded why it’s so important to work as a team to maintain safe and reliable operations,” said Steve Horn, Luminant chief fossil officer. “Our employees deserve immense credit for safely working in these extreme temperatures to help their fellow Texans stay safe and cool.”

With more hot days ahead, Luminant’s people, plants and mines are doing their part for safely powering Texas.

Luminant Response to the Texas Observer


Luminant_logo_sm300x189To no surprise, the Texas Observer piece on Luminant’s 2015 property tax litigation is an incomplete description of the company’s effort to reach fair taxable values at our plants that are much lower because of sustained low wholesale power prices.

Our goal is paying our fair share and without the court challenges, those valuations would result in the company paying excess property taxes for 2015. To suggest any other motive, as this article does, is inaccurate and cynical.

Although we provided the Texas Observer with extensive responses and data explaining how market forces drastically reduced plants revenue, income and property values and why power plants are valued differently from homes, those points were excluded leaving the reader with insufficient context.

Historically low natural gas prices and, increasingly, subsidized wind generation, especially since 2014, have driven power prices sharply lower with forecasts for them to remain low for years.

The Texas Observer implies homes and power plants for property tax purposes are valued the same through comparable sales. They’re not, despite material we gave to the reporter explaining the distinction. Unlike the residential market, there are very few sales of power plants that can provide a good comparable value.

The best, most accurate and sensible way to determine the fair taxable value of a power plant is by using what’s called a market-based income model. Market-based income models are widely relied on in Texas by owners of large industrial properties that are income-producing assets.

Counter to what the Texas Observer reported, we have shared with county appraisers for the past several years that many of our units have lost significant amounts of income – well into the tens of millions of dollars for 2015 alone. And our annual filings with the Securities and Exchange Commission have shown a steadily decreasing value for these same plants.

Just as plant values were higher when power prices, revenue and income were greater, values must now accurately reflect the impact of low prices. What remains constant is that as a longtime member of the communities where our plants, mines and many employees call home, we remain deeply concerned about their overall success.

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Tradinghouse Power Plant: A Legacy of Planning for the Growing Power Needs of Texas

We're committed to powering Texas with reliable, affordable and a sustainable supply of electricity


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The following op-ed ran in this Sunday’s Waco Tribune-Herald discussing Luminant’s plans to build new natural gas plants at Lake Creek and Tradinghouse.

 

For more than six decades, Luminant has had a presence in McLennan County as part of our deep commitment to meet the electric power demands of our growing state. A natural gas plant at our Lake Creek site near Riesel became operational in 1953. Another gas plant at Tradinghouse Lake went online in 1970. Both plants were important assets in powering Texas till they were retired six to seven years ago and the sites cleared.

Just like our predecessor companies that built those plants in the mid-20th century, Luminant shares the vision of planning for the future so our state has reliable affordable power to remain a great place to live, work and grow. That’s why we’re developing plans to potentially build new natural gas plants at Lake Creek and Tradinghouse. The Texas Commission on Environmental Quality has already granted air permits to build two 230-megawatt simple-cycle combustion turbines at each site for a total of 460 megawatts at both locations.

In 2015, Luminant applied to amend the Tradinghouse air permit to allow the option of converting the two simple-cycle turbines to what’s called combined-cycle capability in which a common steam turbine is added at approximately 350 megawatts. We’re also asking for the option there to potentially build two more simple-cycle turbines totaling about 460 megawatts that could run in combined-cycle with a second steam turbine of about 350 megawatts.

If all these units at Tradinghouse were to be built and running in combined-cycle mode, they’d produce approximately 1,620 megawatts of high-efficiency, low-emitting state-of-the-art natural gas-generated electricity. That’s enough to power about 810,000 homes in normal conditions.

McLennan County, the city of Waco and the Greater Waco Chamber of Commerce have had questions about what impact nitrogen oxide emissions from the Tradinghouse plant, if built, might have on the area’s ozone. Vehicles, certain industries and fossil-fueled power plants all release NOx that can lead to ozone forming on hot, sunny days. The national ozone standard is 70 parts per billion as set by the Environmental Protection Agency and the Waco area complies at 67 ppb. Understandably, the local governments and chamber want Waco to stay in compliance. So do we.

Their concerns stemmed from computer modeling by a consultant hired by the Heart of Texas Council of Governments. The consultant plugged in some mistaken assumptions on how the units could operate and the associated emissions impacts if we just ran the four gas turbines without the steam turbines at Tradinghouse. That kind of generation is neither realistic nor economical but would’ve been allowed under the permit amendment if approved.

However, the modeling showed if Tradinghouse ran in full combined-cycle mode as designed, and as it actually would, the ozone impact would be negligible. We shared with the county, city, chamber and Tribune-Herald why the consultant report overestimated the projected ozone impact of the plant because of these inaccuracies.

We’re committed to being good neighbors. We listen. And we work together in the communities our plants call home. So, to address these concerns, we told the TCEQ in April to add a permit limitation that would allow only two of the gas turbines to run in simple-cycle mode at any given time.

Recently, an environmental activist wrote in the Trib opposing construction of the Tradinghouse plant, claiming Texas should no longer rely on fossil-fueled power plants, just renewable energy. Solar and wind have a place in the diverse energy mix that’s powering Texas. But to rely on intermittent forms of generation isn’t realistic. Just this spring, U.S. Interior Secretary Sally Jewell told those who demand fossil fuels remain in the ground that “to say we could shift to 100 percent renewables is naïve.”

In citing cities, such as Georgetown, that plan to purchase 100 percent renewable energy, what this activist doesn’t mention is that such deals are possible only because of dependable generation such as natural gas. Even the mayor of Georgetown acknowledges when there’s not enough wind or sun, his city must buy power from the ERCOT grid where almost 90 percent of the power comes from reliable fuels, such as natural gas.

We’ve made no final decision to build these plants at Tradinghouse and Lake Creek. Market conditions driven by low wholesale power prices just don’t financially support new generation. But more will be needed eventually and, by securing the needed air permits, Luminant wants to be in the position to quickly add new generation when conditions improve.

At Luminant, we’re proud of our stewardship of the air and water. All of our existing plants meet or exceed all the environmental rules and laws of our state and nation. And should we be granted the permit amendment we’re seeking and build at Tradinghouse, we can assure the people of McLennan County the affordable power generated there will use the best technology, emissions controls and, importantly, be dependable to keep up with the power demands of a growing Texas.

Luminant Responds to Dallas City Council Ozone Resolution


 

Luminant_logo_sm300x189We understand the city council wanting to make a statement on clean air. Luminant shares the desire for clean air and that’s why all our power plants meet or exceed the rules and laws of our state and nation on emissions.

Reducing ozone should be based on facts, however, and the facts show, the vast majority, about 80 percent, of nitrogen oxide emissions in the 10-county North Texas area responsible for the formation of ozone comes from mobile sources—cars, trucks, construction equipment, airplanes and locomotives, not power plants.

As the amended resolution recognizes, control measures such as Selective Catalytic Reduction on coal plants would help only where practical. The TCEQ already found the controls requested “are not necessary” to demonstrate attainment for ozone in the 10-county area by the 2018 deadline.

For more on the reality of North Texas ozone and power plants and the environmental activist groups behind this resolution, check out this POV blog post.

Update on Comanche Peak Nuclear Power Plant, Fair Taxable Value and Sustained Low Power Prices


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There’s a lot of misunderstanding of how power plants are assessed for property taxes and the path provided by state law to ultimately determine their fair taxable value.

That’s certainly the current situation with Comanche Peak Nuclear Power Plant near Glen Rose in Somervell County, southwest of Fort Worth.

In recent social media posts and comments in news stories, there are facts ignored, distorted or misinterpreted. Let’s fill in the entire record for what’s going on and why Comanche Peak’s value is much lower than it used to be due to low wholesale power prices caused by inexpensive natural gas and subsidized wind generation.

Luminant’s goal from the outset has been to determine Comanche Peak’s taxable value for 2015. As a longtime corporate citizen, we’re committed to pay our fair share and are pursuing the process available to any taxpayer. Any opinions contrary to our stated goal are misinformed.

After the Somervell County Appraisal District assessed Comanche Peak’s 2015 value at $2.2 billion, we appealed to the county’s Appraisal Review Board which agreed with the assessment. We then turned to the courts, as provided by law, and in March, the state district judge for the 18th Judicial District, who’s elected from Somervell and Johnson counties, sided with the appraisal district.

Luminant believes the court decision doesn’t reflect the 2015 taxable value of Comanche Peak given the market conditions, $949 million. On this undisputed amount of assessed value, we already paid Somervell County taxing jurisdictions almost $16 million in taxes. We have appealed the district court’s decision to the Tenth Court of Appeals in Waco.

But how we got to this point is just half the story. The other half is why. And the reason is pretty simple for those who accept the clear hard fact that markets go up and they go down. When prices were higher, Comanche Peak’s value was greater and it paid more in property taxes. But power prices are now at historic lows and when Comanche Peak makes less revenue, its value as an income producing asset must follow.

How steep have power prices fallen? In 2008, average annual wholesale power prices in ERCOT were more than $63 per megawatt hour. In the first quarter of 2015, wholesale power prices averaged $26 per megawatt hour and they were about $17 per megawatt hour in the first quarter of this year. That’s a 35 percent drop in just the last year.

As power prices plummeted and especially in the past two years, we informed the Somervell County Appraisal District and county officials of our firm determination to arrive at a fair taxable value for Comanche Peak. So, we’re confident they’ve been aware for some time of how long this process may take.

We’re certainly aware of Comanche Peak’s impact on the school and county governments in Somervell County that decided to structure their budgets so that more than 70 percent of their total property tax revenue comes from the plant.  During the process to reach a 2015 taxable value for Comanche Peak, those local governments that passed solid prudent budgets with adequate reserves are fully capable of evaluating their options.

Luminant and Comanche Peak are longtime members of Somervell County communities so, of course, we remain concerned about their overall success. With all the facts known, we’re also hopeful people will understand the importance of determining what’s fair in this sustained low power price market.

When Neighbors Ask - 2016

 

Luminant Completes Purchase of Combined-Cycle Gas Plants


Luminant_logo_sm300x189Luminant has acquired two combined-cycle natural gas plants in Texas, having received regulatory approval from the Public Utility Commission of Texas and closing on the acquisition today. These generating assets represent nearly 3,000 megawatts of capacity in the competitive ERCOT market: the Forney Power Plant in Forney with a capacity of 1,912 megawatts and the Lamar Power Plant in Paris with a capacity of 1,076 megawatts.

Luminant Sign_Lamar PlantThe company announced the $1.3 billion acquisition last November, and Luminant Chief Executive Officer Mac McFarland said, “We’re delighted to add these two combined-cycle natural gas plants that will enhance our already diverse generation assets.”

With their combined capacity, these plants can power 1.5 million homes in normal conditions.

As the company assumes operational control of the Lamar and Forney plants, Luminant Senior Vice President-Fossil Generation Steve Horn said, “These are excellent, well-run plants and very competitive in the ERCOT market. Of course, the greatest assets at these plants are the people who run them. They do a tremendous job, and we’re so excited about getting to know them better.”

Forney Plant Close UpThere are 30 to 40 NextEra Energy Resources employees at each location, and they will continue to run the plants through a short-term agreement with NextEra Energy Resources before they’re transitioned to be employees of Luminant.

Luminant adds these combined-cycle gas turbine power plants to its energy portfolio that includes coal, natural gas and nuclear power, as well as significant purchases of wind-generated electricity and a recently announced solar power purchase agreement.

Luminant Names New Chief Nuclear Officer for Comanche Peak Nuclear Power Plant


Ken Peters, chief nuclear officer for Comanche Peak Nuclear Power Plant

Ken Peters, chief nuclear officer for Comanche Peak Nuclear Power Plant.

Luminant today named Ken Peters as chief nuclear officer for Comanche Peak Nuclear Power Plant, effective April 1. In announcing Peters’ appointment, Luminant Chief Executive Officer Mac McFarland said, “Ken is a tremendous leader. His dedication to safety, along with his broad experience and knowledge in the nuclear generation industry, has been vital to Comanche Peak being one of the top performing plants in the nation. I know he’s prepared to continue pursuing excellence in Comanche Peak’s safety, operations and reliability.”

Peters has been serving as acting CNO at Comanche Peak since December and joined Luminant in 2012 as site vice president at the plant.

In assuming his new role as CNO, Peters said, “I’m honored to be part of and lead such a great group of nuclear energy professionals here at Comanche Peak. Our mission is to operate it as a safe, efficient, reliable, cost-effective, competitive nuclear power plant.”

Peters has more than 30 years’ experience in nuclear energy generation. Prior to joining Luminant, he held various managerial roles at other nuclear power stations around the country, including plant manager and vice president, engineering and projects. A New Jersey Institute of Technology graduate, Peters also received master’s degrees from Virginia Tech and Rensselaer Polytechnic Institute.

Comanche Peak is a two-unit, nuclear-fueled power plant in Somervell County, Texas, southwest of the Dallas-Fort Worth area. Each unit has a capacity of 1,150 megawatts. Unit 1 began commercial operation in 1990 and unit 2 in 1993. As one of the performance leaders among the nation’s nuclear power plants, Comanche Peak provides dependable power in the ERCOT competitive market operating at a capacity factor of 99 percent in 2015.