The Electric Reliability Council of Texas (ERCOT) has signed short-term contracts with NRG Energy (NYSE: NRG) and Garland Light and Power to activate 400 MW of natural gas-fired capacity in four mothballed units to help with the extreme heat and drought in the state.
The two companies will return four natural gas-fired units to service to be available if needed through October 2011 to reduce the risk of rotating outages across the ERCOT region.
The temporary contracts are based on the pricing methodology used for reliability-must-run units under the ERCOT market rules. The payments will be figured on a cost-recovery model, meaning the owners get paid for their fixed costs, such as for staff and maintenance, as well as a cost for fuel.
To minimize the impact of this temporary reliability tool on other participants in the competitive market, the four units will be called on only when necessary to avoid emergencies so the units will not displace units that are on-line and bidding into the market.
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