56896

Docket/project no. 56896 concerns the Texas Energy Fund (TEF) in-ERCOT Generation Loan Program, administered by the Public Utility Commission of Texas. The program is designed to finance the construction of new dispatchable power generation facilities in Texas, with the goal of improving grid reliability.

Key points:
- The Commission reviewed and advanced multiple loan applications from various energy project sponsors to due diligence review, focusing on criteria such as diversity of applicant types, siting locations, generation types, speed to market, and ability to address transmission constraints.
- Several applications were withdrawn or removed during the process for reasons including commercial terms, project risk, and failure to meet due diligence requirements. Notably, LS Power and WattBridge withdrew significant projects totaling over 2,100 MW combined 1, 2.
- As of May 2025, the recommended portfolio included 19 applications, seeking approximately $5.15 billion in loans to support about 9,341 MW of new dispatchable generation capacity. The latest nameplate capacity for the portfolio was reported as 9,592 MW 3.
- The due diligence process for each application was expected to take four to seven months, with loan amounts and project capacities to be finalized upon execution 4, 3.
- The Commission delegated authority to the executive director to deny applications that fail due diligence requirements 5.

In summary, this docket details the review, advancement, withdrawal, and ongoing due diligence of applications under the TEF in-ERCOT loan program, with the aim of increasing Texas's dispatchable power generation capacity.

Here is a timeline of key events and submissions in Project No. 56896 – Texas Energy Fund in-ERCOT Loan Program:

- July 27, 2024: Application period for the Texas Energy Fund (TEF) in-ERCOT generation loan program closes. 72 applications are received, seeking over $24 billion for more than 38,000 MW of potential new generation 1.

- August 8, 2024: Commission staff delivers a memorandum outlining the application review process and criteria to be considered for advancing applications to due diligence 1.

- August 15, 2024: Scheduled commission meeting to discuss the review process and preparation for portfolio advancement recommendations 1.

- August 29, 2024: Open meeting where staff presents a recommended portfolio to advance to due diligence. An initial portfolio representing 9,781 MW and $5.38 billion in requested loans is recommended for advancement 2, 3.

- December 12, 2024: Commission advances additional applications to due diligence at this open meeting 4, 5.

- January 16, 2025: Further advancement of applications to due diligence is reported, including the addition of application number app-147 (Rockland Power Partners IV, LP, 342 MW) 4, 4.

- April 15–16, 2025: Application 131 (Emberclear Management, Jupiter Island Capital) is denied for failure to meet due diligence requirements; Emberyork Energy Center submits a letter contesting the denial 6, 7.

- April 24, 2025: Open meeting where four more applications (app-159, app-161, app-221, app-224) from Nightpeak Energy LLC and Invenergy are recommended for advancement. At this point, 18 total applications representing $5.04 billion in requested loans and 9,218 MW of potential new generation are in due diligence. Due diligence is expected to take four to seven months to complete 5, 8.

- June 23, 2025: LS Power Equity Advisors withdraws its application for a 527 MW project (app-129) from the TEF loan program 9.

This timeline summarizes the major milestones, meetings, submissions, and decisions in the proceeding as of July 1, 2025.

The docket for the Texas Energy Fund (TEF) in-ERCOT generation loan program identifies several areas of growth and outlines key considerations for each:

Areas of Growth:
- New Power Generation Capacity: 72 applications were received seeking more than $24 billion for over 38,000 MW of potential new generation projects across various technologies and locations in the ERCOT region. The recommended portfolio as of August 2024 represented 9,781 MW of potential new generation and $5.38 billion in loans if all applicants execute loan agreements 1, 2.
- Diversity in Project Types and Locations: Projects submitted cover a range of sizes, technologies (e.g., simple cycle, combined cycle gas turbines), and geographical locations within ERCOT, aiming to support grid reliability and meet legislative goals 1, 2.
- Acceleration of Projects to Market: Projects are considered for their speed to commercial operation to address urgent reliability needs 1, 2.

Key Considerations:
- Technical and Regional Attributes: Applications are evaluated for their technical feasibility and suitability for specific regions, including the ability to relieve known transmission constraints and support load growth 1, 2.
- Financial Attributes: Each project’s financial structure, including the sponsor’s history and financial characteristics, is scrutinized to ensure viability and responsible use of funds 2.
- Sponsor Diversity and Suitability: The process seeks diversity among applicant types (e.g., independent power producers, municipal utilities), and includes an enhanced "know your customer" review to ensure applicants are suitable borrowers 1, 3, 4.
- Portfolio Diversity: The portfolio is constructed to avoid overrepresentation by any one resource type, applicant type, or location, with no more than one project per applicant advanced in a given funding round 2.
- Speed to Market and Transmission Benefits: Priority is given to projects that can be commissioned quickly and provide measurable benefits to the ERCOT grid by addressing transmission constraints 2, 2.
- Due Diligence: Projects advanced must complete a due diligence phase lasting 4–8 months, where their material assertions and readiness are further validated before any loan agreement is executed 2.

In summary, the key areas of growth are focused on expanding dispatchable generation capacity, ensuring diversity in projects, and accelerating reliable power solutions. Considerations span technical, financial, portfolio diversity, and grid benefit factors throughout a structured evaluation process 1, 2.

The docket reveals several financial and timeline risks and concerns:

Financial Risks and Concerns:
- The Texas market is currently unable to financially support new natural gas plant construction without significant assistance, even with Texas Energy Fund (TEF) loans at a 3% interest rate. Over 65% of a project’s debt must be at this low rate just to break even, highlighting a lack of project financial viability under current conditions 1, 1.
- There are concerns about wasted public funds on flawed application review processes. Specifically, a breakdown in due diligence led to applications progressing before being denied for critical issues, resulting in calls for a full refund of any public funds spent on such flawed processes 2, 2.
- The terms offered through the TEF introduce additional risks and costs, leading to lower-than-anticipated returns for project sponsors and prompting project withdrawals due to these financial dynamics 3.
- Uncertainty in project cost estimation due to delays in obtaining required permits (such as air permits) creates risk in signing binding loan documentation and may lead to project withdrawal or delays 4, 4.

Timeline Risks and Concerns:
- Uncertain timing of air permit issuance can prevent project sponsors from determining overall costs and signing loan agreements, directly impacting project timelines 4, 4.
- The due diligence review process for TEF applications is expected to take four to seven months, potentially delaying project initiation and completion 5.
- Failures in the due diligence process, including incomplete financial or environmental impact studies before major funding decisions, can lead to further delays and undermine trust in the approval process 2, 2, 6.

Overall, the primary concerns are the financial viability of new projects under current market conditions, risks of misallocated or wasted public funds, the impact of permitting and regulatory delays, and the adequacy and integrity of the due diligence and approval process.

Stakeholders in this docket (Texas Energy Fund, Project No. 56896) include the following entities and individuals, along with their positions on specific proposals:

For Funding or Proposals (Primarily for new natural gas-fired generation):

- HGP (Houston Generation Partners): Proposes a strategic initiative for 20 GW of new natural gas-fired power generation in Texas over 5 years, advocating for innovative financial mechanisms to support such projects 1, 1.
- Imperial Power Plant LLC: Applied for TEF funding to build a 148 MW natural gas peaker plant ("Imperial Power Plant") in Sugar Land, TX, arguing it would enhance energy security and grid reliability 2.
- Constellation Energy Generation, LLC: Applied for a loan for 300 MW of additional gas-fired generation at the Wolf Hollow III facility, before withdrawing due to cost uncertainties, but not opposing the overall initiative 3.
- NRG Energy, Inc. and WattBridge Energy IPP Holdings, LLC: Both sought TEF funding for new generation projects with a combined capacity of 1,231 MW, advancing to due diligence 4.

Against Specific Proposals (Primarily against the Imperial Power Plant and/or new natural gas projects in populated areas):

- Haley Schulz (Resident, Fort Bend County): Strongly opposes TEF funding for the Imperial Power Plant in Sugar Land, citing lack of feasibility studies, environmental and health concerns, and advocates for funding clean, dispatchable energy and grid modernization instead 5, 5.
- Kashyap Patel (Resident, Sugar Land): Opposes the Imperial Power Plant, citing proximity to schools and residents, health risks from emissions, and existing pollution from nearby coal plants. Requests the PUC deny financing for this plant 6.
- Gretchen Day (Advocate, Faith-Based Environmental Group): Opposes exclusive funding of natural gas plants via TEF. Advocates for dedicating 18% of TEF funds to backup power systems like microgrids, and for a greater focus on renewables and grid batteries 7.

Withdrawn/Disengaged Stakeholders:

- NextEra Energy Resources: States it was named as a sponsor in an application (Aegle Power) without its consent; not seeking TEF funding nor participating in the related project 8.
- Coronado Ventures/La Paloma Energy Center: Similarly claims their name/work was used in an application without consent; not involved with the application 9.
- WattBridge Energy: Withdrew four natural gas-fired generation projects (totaling 1,620 MW) from TEF consideration due to program terms introducing risk and lower returns, but remains open to future ERCOT investments via other financing 10.

Summary:
- Proponents for new gas generation and TEF funding: HGP, Imperial Power Plant LLC, NRG Energy, WattBridge (initially), Constellation (initially).
- Opponents of specific projects (notably Imperial Power Plant) or funding approach: Multiple local residents, environmental advocates.
- Several large energy companies have withdrawn or clarified non-involvement due to financial or procedural concerns.

No evidence is present in the excerpts of direct support for the Imperial Power Plant from stakeholders other than the applicant itself. Most community input is opposed to this specific project.