Texas loan program for new gas plants would be open to private generators that also supply ERCOT

Texas loan program for new gas plants would be open to private generators that also supply ERCOT | Utility Dive

Dive Brief:

- A new taxpayer-funded loan program to support development of gas-fired power plants in the Electric Reliability Council of Texas market could make funds available to private industrial generators so long as they also supply energy to the state’s grid, according to draft rules proposed by staff of the Public Utility Commission of Texas on Monday.
- Voters authorized the Texas Energy Fund, or TEF, in November, allocating $5 billion to the program. The PUCT could vote to approve the proposed program rules at its March 21 open meeting.
- Allowing private use networks, or PUNs, to access the loan program will help to develop generation resources across a more “diverse” area, said Chairman Thomas Gleeson. “This program should absolutely allow that.”

Dive Insight:

By law, TEF loans cannot go to facilities that will be used “ primarily to serve an industrial load or private use network.” At Thursday’s PUCT open meeting, commissioner discussion focused on how PUNs could access the program depending on how the new capacity is allocated.

Gleeson gave the example of a 1,200 MW generation project in the Permian Basin that has a native load of 500 MW and would provide the remaining 700 MW for the local grid.

“Generation there is very important. They need a lot of electricity and we are constantly chasing that area with transmission,” he said. “I think projects like that are of high value and absolutely should be considered eligible for the program.”

Allowing the PUNs to apply for TEF funds “seems to optimize the use of these cogeneration facilities in a way that would not only benefit us by putting more megawatts on the grid, but also by reducing the demand from these large consumers,” Commissioner Lori Cobos said.

The proposed rules would allow PUNs to access the program, but “the portion of new nameplate capacity that will serve the industrial load or PUN must be less than 50 percent of the facility's total new nameplate capacity, and the remainder of new capacity serving the ERCOT market must be greater than 100 MW.”

Commissioners also discussed how to ensure loan recipients are incentivized to complete their generation projects and not game the system against potential competitors.

Gleeson said he has heard concerns that a generator might apply for a loan and back out late in the process, “and make it very difficult for us to then reallocate those funds to other entities. ... That type of gamesmanship should not be used and we'll be looking for it.”

PUCT staff attorney Allison Fink told the commissioners that the application is expected to be sufficiently rigorous to “help weed out those participants that may be considering pulling out of the loan process, maybe bad faith.”

Commissioner Cobos acknowledged ERCOT is a competitive market, “so it's important that applicants don't do a foot dance to block out competitors. That's just not acceptable.”

“We're hopeful that our process is geared toward avoiding that type of behavior and not incentivizing it,” Fink said.

The timelines included in the proposed rules are short, and Gleeson said he hopes to “get this rule across the finish line at the next open meeting.”

The proposed rule would require loan applicants to submit a notice of intent to apply by May 31; a formal application window would run from June 1 to July 27. Initial loan disbursements are planned by the end of 2025, according to commission planning documents.