Mission gas-fired plant will pump electricity into mexico local news themonitor.com electricity basics


“The previous owners just decided not to sell into Mexico. I think it was something that it was neglected in the past,” said Sean Klimczak, senior managing director for the Blackstone group, a venture capital investment firm based in New York that purchased the Frontera Generation plant here from Direct Energy in 2013.

In the fine print of the transaction were a $685 million cash transfer and an agreement that Direct Energy would continue to receive the monetary equivalent of all the electricity generated from the Mission plant and two others inBastrop and Paris, which produce a combined 1,295 megawatts, for an undisclosed amount for three years.

Blackstone officials said they plan to export 170 megawatts of electricity to the Mexican market starting next year and anticipate that the entire plant capacity of 524 megawatts will be removed from the Electricity Reliability Council of Texas, or ERCOT, grid as of 2016 and until December 2023.

The reason for the decisions, Blackstone officials said, directly correlated to the price per kilowatt for commercial power in Mexico. It was 19.8 cents/kWh and 11.4 cents/kWh for industrial in 2011, according to the last report conducted by Secretaria de Energia de Mexico (SENER), the policy arm for the Mexican government when it comes to electricity reliability. Multiply that by 3.5 million commercial customers and 31.3 million residential consumers and that’s a big chunk of change. In Texas, the price per kilowatt for commercial power barely hits 10 cents.

Frontera Generation, a combined cycle natural gas facility on Goodwin Road, was built in 1999 alongside a 138-kilovolt single circuit electric transmission line that runs into the Cumbres substation in Reynosa and intersects with the Comision Federal de Electricidad (CFE) system, the power grid run by the Mexican government. The project was approved via presidential permit and stamped by the Department of Energy.

At the time, wholesale electricity providers were prohibited from selling retail electricity, which means directly to customers or businesses without using a broker. So, a series of subsidiary corporations were formed and joined by then Florida-based TECO Power Services Corporation and reapplied for the permit. When TECO dropped out of the energy market, permit rights were reverted back to Frontera.

Blackstone submitted an application to the Department of Energy to give a wholesale electricity provider access into Mexico’s market in May, but retracted their submission after Mexican President Enrique Pena Nieto announced congressional reforms that allowed wholesale providers to participate in the retail market.

Blackstone officials had said in its application to the Department of Energy that Lonestar Power Marketing LLC, a subsidiary company created by Blackstone, did not have “native load obligations” and itsloss would not impact Texas’ electricity reliability.

Local leaders in the Texas Legislature said the balance between encouraging industry while maintaining public integrity is difficult and that energy generation investors are reluctant to put out money for new power plants due to leaner margins.

“While I have concerns about the proposal and have expressed those concerns to ERCOT, I will be watching carefully how ERCOT evaluates the proposal and determines the impact,” said state Rep. Rene O. Oliveira, D-Brownsville, who sits on the regulated industries committee that oversees the state’s electric grid. “Any action that might negatively impact the availability, reliability, or affordability of electricity in the Valley is going to receive serious scrutiny by regulators and the Legislature.”

“We definitely need the investment; natural gas is worth almost nothing in the U.S.,” said state Rep. Terry Canales, D-Edinburg, who co-hosted a public hearing in Edinburg on natural resources and the impact of Mexico’s reforms on the Texas economy on Friday.