Tenaska Brownsville Generating Station
Overview
The "Tenaska Project" is a now-terminated project to develop the Tenaska Brownsville Generating Station and associated water and gas facilities. BPUB recognizes that this was a significant capital project that, as initially explored, developed and ultimately terminated, created many questions among citizens and ratepayers.
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Project Background
ASSESSING BROWNSVILLE'S POWER NEEDS: In 2009, the "Imagine Brownsville Comprehensive Plan" was published and established community goals for the next 10 years. The city of Brownsville, Greater Brownsville Incentives Corporation, Brownsville Community Improvement Corporation, and the Imagine Brownsville Task Force led the plan. BPUB contributed to the "Utilities Plan" section of the plan, which acknowledged future needs: "Beyond 2019, BPUB will need to plan for and implement the most economically effective combination of generated and purchased power supply." P. 323.
BPUB regularly assesses our community's energy needs and periodically reviews plans to meet energy demands to ensure reliable and cost-effective service. A common practice for utilities is to asses future energy needs as infrastructure can be capital-intensive and require advanced planning. To help generate proposals for meeting projected energy demand, BPUB engages qualified consultants. These firms provide load forecasts and preliminary cost data for meeting the forecasts, so the Board and management can take action through Integrated Resource Plans (IRPs), which serve as BPUB's comprehensive planning tool.
BPUB was exploring opportunities to meet the growing energy demand in our area when Tenaska approached BPUB in 2011. As a reputable generation developer who had worked successfully with BPUB for years, Tenaska discussed building a new power plant in Brownsville. Preliminary agreements were made, and Tenaska created Tenaska Brownsville Partners, LLC, to develop the Tenaska Brownsville Generating Station. In December 2012, the Brownsville city commission approved rate increases to fund the power plant project, ongoing growth, and operations & maintenance. With formal agreements in place, work began promptly on the Tenaska Project.
The Tenaska Brownsville Generating Station was planned to be an 800 MW natural gas power plant on 270 acres in north Brownsville, near the Southmost Regional Water Authority (SRWA). The plant would have provided electricity to about 400,000 Texas homes, with BPUB owning 200 MW of the plant's output. Tenaska was responsible for obtaining purchasers for the balance of the remaining capacity.
As part of the Tenaska Project, BPUB pursued two related opportunities. Since natural gas supplies were limited in the Brownsville area, the plant was planned to be fueled from the Edinburg area, near transmission lines. BPUB worked with the city commission to manage the design and transportation of gas through a new city-owned gas utility. Additionally, the plant would be cooled with treated wastewater, providing an income stream for BPUB.
BPUB's pursuit of the Tenaska Project included feasibility studies and periodic adjustments to the parties' agreements. Initially, construction of the plant was planned to begin in 2014, with commercial operation starting in 2016.
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Creation of a natural gas utility:
The city commission approved a natural gas utility under BPUB's control to develop lines to transport gas and water to Brownsville to alleviate the constraints and create opportunities in the area, including the potential to supply gas to the Silas Ray Power Plant on the west side of Brownsville. BPUB's natural gas pipeline could also expand gas availability to support commercial customers who need natural gas. Work to design the pipeline and acquire the rights-of-way for this 50-mile pipeline was started to meet milestone deadlines.
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Planned reuse of treated wastewater:
Create a new revenue stream using treated wastewater from Robindale Wastewater Treatment Plant, the water source, which would be delivered to the power plant for cooling purposes. BPUB would also be providing potable water to the plant.
CHANGES IN THE ENERGY MARKET: The Tenaska Brownsville Generating Station was initially expected to be a favorable choice, but market conditions changed over time. For example, updated data showed that renewable energy was becoming more economical than fossil-fueled generation, which reduced the interest in long-term electric capacity contracts within the Electric Reliability Council of Texas (ERCOT). As a result, buying energy on the open market became more favorable than investing in capacity from a new power plant. Tenaska was responsible for finding subscribers for the remaining electricity the plant would generate, but the conditions needed for the project to move forward did not materialize. Even though Tenaska and BPUB had invested heavily in pre-construction development, including the Cross-Valley Pipeline Project and water/wastewater-related projects, the project eventually slowed and halted until Tenaska could find the remaining plant subscribers.
DECOMMISSIONING OF OKLAUNION POWERPLANT: When the project was planned and initiated, BPUB's generation portfolio included 18% ownership and a 124MW share of the Oklaunion Coal-fired power plant. Among the changes in the energy market were the increased regulation of emissions, particularly greenhouse gasses, and the aging infrastructure of Oklaunion, which contributed to the decommissioning of the Oklaunion power plant on September 30, 2020. As such, BPUB's need to find additional generation sources to meet demand was increasing.
Financial Overview
FINANCING THE PROJECT: The Brownsville city commission approved a series of rate increases starting in 2013. A percentage of the increases was set aside for constructing a power plant, while the rest was for growth, operations, and maintenance. BPUB received a total of $114,809,414 from the power plant rate increases, and between 2013 and 2016, collected $29 million to cover debt service for the expected construction costs of the power plant. The funds remain unspent with BPUB and are referred to as the Tenaska Equity Fund (TEF). BPUB was required to maintain the TEF under the Tenaska Project agreements while Tenaska marketed the remaining capacity. These agreements have since been terminated.
Additionally, BPUB returned $74.3 million from the power plant rate increases to electric customers from 2017 to 2022 by adjusting the Fuel and Energy Charge on customers' bills. This was part of the "bill reduction program," which aimed to stabilize electric bills. The program was supplemented with additional BPUB funds and ended on December 1, 2022, when the city commission approved BPUB's request to adjust the electric rate to remove project funding. Pre-design costs, including engineering and design fees and utility right-of-way purchases, totaled $30.4 million and were not part of the plant-portion rate increases. BPUB is determining options for distributing the TEF but must first satisfy the terms of bond ordinance 2022-1700 33L before the money is distributed. The steps necessary to satisfy the terms of the ordinance can be found here.
For several months, the BPUB Board has worked closely with the city of Brownsville through a joint subcommittee to outline a TEF distribution roadmap. The BPUB Board of Directors voted to add the net interest earned on the $29 million, bringing the total to $31.6 million. On May 2, 2023, the Brownsville city commission adopted a resolution supporting the disposition of the Tenaska Equity Fund. Eligible BPUB electric customers from April 2013 through September 2016 will start seeing credits on their bill starting May 8.
TEF Distribution Frequently Asked Questions
For additional information regarding the distribution of the TEF, please visit our FAQs guide.
During a Jan. 9 Board meeting, the BPUB Board of Directors approved BPUB to engage with Burton, McCumber & Longoria CPAs and Advisors to conduct an independent financial review of Tenaska-related funds. Below is a financial breakdown of key findings.
Click here to view the report.
Transfer
Equity Fund
Program
with rate increases
and utility right-of-way purchases.
Additional Resources
Customers interested in obtaining the latest updates and presentations may visit our publicly available meetings page.
For additional inquiries, please get in touch with our Communication & Public Relations Department at (956) 983-6247. For Public Information Requests, please visit the Public Information section of our website.
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