CPS Energy is buying four natural gas facilities near Houston at a cost of nearly $1.4 billion. These plants can produce enough energy to meet more than a quarter of CPS Energy’s peak demand.
The deal will save customers money in the long run, CPS Energy officials said, even with its high price tag, because it’s cheaper than building new power plants. The four facilities are relatively new and could operate for another 40 years.
“By acquiring recently constructed, currently operating modern power plants that utilize proven technology already in use by CPS Energy, we avoid higher construction costs, inflationary risk and long timelines associated with building new facilities,” said Rudy D. Garza, the utility’s president and CEO, in a statement.
Garza and other CPS Energy staff spoke more extensively about the new facilities in an interview.
The four new facilities, all between a year and four years old, have the capacity to generate a combined 1,632 megawatts per day, but they will rarely be operated simultaneously.
Adding 1,632 megawatts is significant, Ball said, but the new facilities will be used during peak periods. That means they will help cover San Antonio’s energy needs during high energy demand or emergencies.
Just one megawatt powers roughly 250 homes on a hot summer day.
CPS Energy provides electricity to San Antonio and other communities across Central Texas, roughly 5,900 megawatts during peak demand, said Elaina Ball, the utility’s chief strategy officer on Tuesday.
“They’re going to be used daily,” Ball said. “But they’re not going to be used like, say, a coal plant, which runs every day, 24/7.”
The four Houston-area facilities burn natural gas to generate electricity. This produces less carbon emissions than coal- or oil-burning power plants, according to the U.S. Energy Information Administration, but still produces greenhouse gas emissions.
Ball said the four new facilities could utilize more hydrogen in its natural gas, which could also reduce carbon emissions.
Buying already constructed facilities for $1.4 billion represents a significant savings, said Chief Financial Officer Cory Kuchinsky.
CPS Energy had originally budgeted $3.5 billion to expand its capacity by 1,600 megawatts, all part of a multi-year plan to modernize CPS Energy’s infrastructure, satisfy a growing population and shift away from using coal.
“We have been very very focused on executing what we call our Vision 2027 Plan,” Garza said. “We are continuously in the market for capacity.”
Kuchinsky said CPS Energy had not planned to make this large purchase and has to take on debt it did not anticipate this year to pay the $1.4 billion price tag, but that it would pay off in the long run.
Building new power plants or wind or solar farms can be expensive, takes time and carries some risk during construction, he said. Buying these completed facilities was cheaper and could save CPS Energy customers $2-4 per month over the next 25 years.
“It really is taking the long view, even though we’re issuing more debt than we planned this year, it will save consumers money in the long run,” Kuchinsky said.
It’s CPS Energy’s second major acquisition in two years. The utility bought power generation facilities in Corpus Christi and Laredo last year.
