Entergy New Orleans will seek to increase the share of power it purchases from an Arkansas plant after another company announced that it intends to back out of the deal.
Entergy New Orleans had previously been in line to purchase about 200 megawatts of power from the Union Power Station in El Dorado, Arkansas, through a purchase agreement with Entergy Gulf States Louisiana that was approved earlier this summer by the New Orleans City Council.
Under that agreement, Entergy Gulf States Louisiana, Entergy Arkansas and Entergy Texas were to purchase the power generated at the plant for $948 million, an amount Entergy officials said is about half the cost of building a comparable new plant. Entergy Gulf States Louisiana then planned to sell about 20 percent of the power generated from its portion of the plant to Entergy New Orleans.
But Entergy Texas on Friday asked the Public Utility Commission of Texas to dismiss its application to purchase a share of the plant.
Entergy Texas and Entergy Arkansas each had planned to acquire one of the station’s four natural gas-fired generating units, with Entergy Louisiana buying the other two. Each of the units is capable of producing about 495 megawatts of power.
If the commission grants the Texas company’s request, Entergy New Orleans would seek to purchase the Texas utility’s share of the plant’s output, Entergy Corp. said in a news release.
That means it would be in line to take almost 500 megawatts of power; it would no longer take the 200 megawatts it was going to buy from Entergy Gulf States Louisiana.
Entergy Texas decided to pull out of the plan to focus on building new production capacity in that state, said Gary Huntley, vice president of regulatory and governmental affairs for Entergy New Orleans.
The 500 megawatts will bring Entergy New Orleans close to closing its capacity shortfall, Huntley said. The addition of 200 megawatts still would have left the firm in the market for additional power, he said.
Entergy New Orleans would pay $237 million for the generating unit. The company had planned to spend about $95 million on its 20 percent share from Entergy Gulf States Louisiana, Huntley said.
The company is still calculating what the cost to Entergy New Orleans customers will be to acquire the unit, he said.
In the long term, he said, the company believes the purchase will save customers money. The savings were projected at $60 million a year under the original agreement. The benefits will “proportionally increase” as Entergy adds another 300 megawatts of power under this deal, Huntley said.
The new plan will require City Council approval. The original plan received unanimous support.
Council Utility Committee Chairman Jason Williams had said the earlier deal would “help fill the gap and meet the energy needs of our citizens well into the future,” particularly as Entergy plans to retire its aging Michoud power plant.
Entergy expects to complete the purchase by the end of the year.