(Bloomberg) -- Get ready for summer in Texas, power producers. According to one federal energy regulator, it’s going to be your time to shine.
Coal-fired power plants are shuttering, wiping out generating capacity on Texas’s power grid. And yet electricity use has kept rising, with the state’s power system operator projecting that demand will reach an all-time high as people blast their air conditioners to keep cool this summer. That’s setting the stage for spikes in wholesale power prices -- and hefty generator profits -- as the market works to attract enough supply to meet demand.
“If I am one of the merchant generators down there, I am gearing up for this,” Robert Powelson, a member of the Federal Energy Regulatory Commission, said on the sidelines of a conference in Washington Wednesday. “This is my Superbowl to prove that my plants are going to run. I’m ready to go.”
Texas’s grid operator says its planning reserve margin -- measuring the level of spare capacity on the grid -- will sit at 11 percent above peak demand forecasts this summer. This buffer may not be enough to keep wholesale power prices from surging at times to a cap of $9,000 per megawatt-hour on the hottest days.
“It will be a test,” Powelson said. He likened the potential profits for power generators in Texas to the money made during a so-called bomb cyclone that hit the U.S. Northeast at the start of the year, estimating that one nuclear plant made $116 million off that storm.
“That’s the way the market is supposed to work,” he said. “Let’s not lose sight of that.”
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