Austin Energy has further delayed plans to construct a new half-billion-dollar natural gas power plant at its Decker Creek facility, citing slumping natural gas prices.
The delay, an Austin Energy executive said, likely will mean the utility will continue to operate two old, less efficient generators at Decker that the new unit was supposed to replace. It might also complicate the utility’s bid to rework its electric rates, which would increase costs for many smaller users.
“Right now is not the right time,” Elaina Ball, the utility’s interim chief operating officer, told the American-Statesman. The utility first made the disclosure in a briefing at City Hall last week. “The driver of the change is really making sure that our investments help us meet our affordability goals.”
The recent plunge in natural gas prices means a new plant wouldn’t generate the returns the utility needs to justify the investment, Ball said.
The utility now envisions construction on the new unit beginning in 2018, potentially coming online by 2022. Under the utility’s original timeline, the new generator was already supposed to be under construction and would be producing power by 2018.
The additional Decker delay comes as Austin Energy works through its biennial examination of future power generation needs, of which the new unit is a key component.
The utility is also examining potentially building smaller plants — which can be fired-up quickly to respond spikes in demand, but are more expensive to run — and further investments in such renewable energy sources as wind and solar.
“Austin Energy should take a good, hard look at the economics and whether it makes sense to build a gas plant in the long run,” said Karen Hadden, chairwoman of the Electric Utility Commission, the city’s citizen advisory board for Austin Energy. Hadden has long opposed the plans for a new plant. “I think (the delay) is encouraging.”
The new gas plant has been a major source of contention between Austin Energy and environmentalists such as Hadden, who have questioned its need.
The fight centers around what sort of generation the utility needs to build as Austin grows.
Austin Energy argues it needs the new natural gas unit at Decker to provide a source of always-on electricity that works rain or shine, known as baseline production.
Environmentalists counter that the real need is for additional generation that can be quickly switched on and off to address spikes in demand, and that the combination of wind and solar power is an effective substitute for the traditional always-on power plant — like the planned Decker unit.
The delayed retirement of the two units at Decker could reduce the costs that Austin Energy is looking to cover in the upcoming overhaul of electricity rates, consumer advocates said. The proposed rates offered earlier this year would result in increased bills for many smaller users, while cutting rates for most business customers.
Austin Energy has budgeted more than $19 million a year toward paying for the retirement of some of its existing power plants, including the two generators at Decker.
“It could certainly change some of the issues in the rate case,” said consumer advocate Lanetta Cooper, an attorney with Texas Legal Services Center, who is involved in the rate case. “If you’ve got more time, that means you don’t have to put in as much (money) every year.”