Gas Plant Agreement Advances CPS Toward Cleaner, More Diverse Fleet

May 2012, Vol. 239 No. 5

In an era of increasing environmental regulations, CPS Energy is one of the first utilities in the nation to make a proactive transition from older coal-fired power to a much cleaner natural gas-fired power.

President and CEO Doyle Beneby said San Antonio utility has an agreement to buy an existing natural gas plant, supporting its strategy of diversification and risk management and allowing customers to continue to benefit from a generation portfolio that is heavily weighted in low-cost, cleaner traditional resources.

Rio Nogales, located in Seguin, TX is an 800-megawatt (MW) combined-cycle gas plant that will replace the energy output of J.T. Deely, a two-unit coal plant, planned to come offline in 2018. Purchasing the plant allows CPS Energy to avoid a minimum of $1 billion in costs that would have been required to keep Deely, the utility's oldest coal plant, operational and compliant with expected environmental regulations.

"This agreement is a short- and long-term win for our ratepayers and the South Texas economy, as well as our community's air quality," said Beneby. "We are avoiding the continuous costs of environmental retrofits to Deely, starting with a $565 million scrubber. This investment is in power that does not emit particulate matter or sulfur dioxide and supports abundant natural gas resources in Texas, rather than coal from Wyoming."

In comparison to the Deely Power Plant, a natural gas combined-cycle plant:
* uses approximately one-half the water;
* emits approximately one-half the carbon dioxide;
* emits approximately one-third of the ozone-forming nitrogen oxide emissions;
* has virtually no sulfur dioxide, mercury, and particulate matter emissions;
* and, has no ash by-product to dispose of, reducing recycling efforts.
 
Rio Nogales is owned by a Tenaska Capital Management, LLC, affiliate, which has entered into a purchase and sale agreement with CPS Energy, capping the utility's eight-month process to identify additional natural gas resources. The 10-year old plant is expected to be operational for the next 30-40 years.