Gibbons Creek Generating Station, a coal-fired power plant about 20 miles from Bryan near College Station, put the state’s grid operator on notice that the plant will not operate this summer. The closure reduces the state’s already tight power reserves and is sparking forecasts of higher electricity prices.

The Texas Municipal Power Agency, a group comprising the cities of Bryan, Garland, Denton and Greenville, owns the plant and notified the Electric Reliability Council of Texas that it will suspend operations of the 470-megawatt plant through at least the summer. The move follows the shutdown last year of three coal plants with a combined generation capacity of more than 4,000 megawatts — enough to power at least 800,000 Texas homes — by Vistra Energy of Irving.

The loss of Gibbons Creek will cut the projected power reserve margin from the already record low of 8.1 percent to 7.4 percent, just over half of ERCOT’s reserve margin goal of 13.7 percent. The reserve margin measures additional power supplies available to meet unusually high demand, fill in for generators that break down unexpectedly, or both.

The lower the power reserves, the higher the risks of shortages, price spikes and in worst case scenarios, disruptions to the power system in the form of blackouts and brown outs. DeAnn Walker, chairman of the Public Utility Commission, has called the shrinking power supply cushion “very scary.”

On HoustonChronicle.com: ERCOT predicts lower reserve margin for electricity this summer

Futures markets, which allow utilities and retail power companies to contract for power months in advance, are reaching similar conclusions. The August contract is trading at about $170 per megawatt hour, more than 60 percent above last summer’s peak wholesale price of $105 per megawatt hour, according to the Intercontinental Exchange, which operates commodities markets. Such an increase would eventually filter down to household bills.

“This tells you the financial futures market is expecting shortages,” said Ed Hirs, energy economist at the University of Houston.

ERCOT is anticipating more periods of price spikes, given the tighter reserve margins compared to last summer, said spokeswoman Leslie Sopko.

Coal-fired power plants have shut down in Texas and across the nation in recent years as they were undercut by cheaper natural gas and the rapidly falling cost of renewable energy, such as wind and solar. For the past two years, Gibbons Creek has operated as a “peaker plant,” dormant except during the scorching summer months when demand soars, supplies dwindle and prices spike.

In recent years, however, additional supplies from other sources, particularly wind, have moderated the summer price spikes that made it worth the cost of keeping peaker plants ready to go into operation. Peaker plants now face the growing likelihood that they may never be called upon to produce power, even as they maintain and staff them.

Gibbons Creek did not return calls for comment.

Andrew Barlow, spokesman for the Public Utility Commission, said regulators are concerned about the impact of the loss of the Gibbons Creek plant on electricity supplies this summer. The commission is awaiting an update from ERCOT on the power situation, he said.

The Texas Municipal Power Agency has been trying to sell Gibbons Creek since 2016 and announced it reached a deal that year, according to financial reports from the nonprofit company. But the deal unraveled, according to the reports.

The changing power market is upending traditional business models that banked on summertime price spikes to generate profits. As a result, traditional generators are arguing they have little incentive to invest in new plants and maintain older ones to have them available when demand soars. They have proposed changes in the way the market operates, including advocating for additional payments during peak demand periods, which would boost electricity prices by as much as $4 billion statewide.

On HoustonChronicle.com: Texas power companies lobby for higher prices

The Public Utility Commission has asked ERCOT to investigate and identify power reserves that may be overlooked in their calculations. Many large retailers, manufacturing firms and other companies have installed emergency back up generators that can be put into operation quickly if severe weather knocks out power or peak summer demand sends wholesale prices, which they pay, to exorbitant levels.

In Texas, wholesale prices are allowed to rise to as much $9,000 per megawatt. Reliant Energy reported in June that wholesale prices during the hottest time of the day which is typically late summer afternoons when air conditioners are going full blast were running about $200 a megawatt hour.

lynn.sixel@chron.com

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