A great year for Calpine

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Houston-based merchant utility Calpine had a strong year, mirroring last summer’s heat wave in Texas that pushed power prices to historic highs.

Calpine, the nation’s largest producer of electricity from natural gas and a retail electricity supplier that sells electricity under the Champion Energy brand, earned $770 million in 2019, a sharp increase from to $10 million in 2018, according to reports Calpine files with securities regulators.

Calpine is Houston’s largest privately held company, with revenue of $10.1 billion last year, up from $9.5 billion in 2018. The company has 2,300 employees, including 900 in the Houston area.

Company executives attributed the strength of plant operations, strong and rising retail sales and skilled trading in power markets by the commercial operations teams for its performance.

“I’m proud to report that 2019 was a banner year, following a record high in 2018 and 2020 promising to be in between,” said Thad Hill, CEO and Chairman of Calpine.

Calpine was acquired by New Jersey private equity firm Energy Capital Partners two years ago in a deal valued at nearly $17 billion, including the assumption of Calpine’s debt. Investors are already recovering part of their investment.

Calpine paid the private equity firm a $1.15 billion dividend on the sale of a power plant in Delaware and another in Wisconsin last year, as well as available cash. It also paid investors a $20 million dividend in 2018.

Wide range

Calpine has 77 power plants that produce 26,035 megawatts of electricity across the country, including a plant under construction in Louisiana that is expected to generate 361 megawatts.

This wide geographic reach means the company is used to dealing with hurricanes, wildfires and floods. But Calpine has never had an emergency like COVID-19 that has affected every factory and every office, said senior vice president and chief administrative officer Hether Benjamin Brown.

She credits strong business continuity planning, a focus on safety, and the hard work of plant employees to keep the lights on in the face of adversity.

Last year, Texas regulators made it easier for power companies to win during times of tight supply and high demand by boosting a price supplement that raises prices when power shortages loom. The wholesale electricity price in Texas is capped at $9,000 per megawatt hour.

Calpine tweaked its operations before last summer to ensure its power plants were in top shape when the business needed them most. Calpine told investors it generated 100.8 million megawatt hours of electricity last year, 5% more than in 2018.

The company also inadvertently pulled back the curtain on data reliability issues plaguing the state grid operator, the Electric Reliability Council of Texas. In May 2019, a Calpine IT employee mistakenly sent data to ERCOT indicating that some 4,000 megawatts of output — enough to power about 800,000 Texas homes — was offline when temperatures were in the 90s.

For a few moments, the price of electricity in the Texas wholesale market rose from around $40 per megawatt hour to $9,000. A commodity trader in Houston estimated the error generated a multi-million dollar windfall for power companies at the expense of industrial customers, power traders and retail power providers.

New rules

Calpine claimed responsibility and asked the network manager to reprice the block of sales that occurred during this period. But ERCOT said the repricing was impractical because such data errors occur frequently.

The dispute is still pending before the Public Utility Commission. ERCOT launched a data error review and announced new rules in June designed to better identify incorrect data and reduce the likelihood of incorrect information being used to calculate the amount of energy available on the grid.

lm.sixel@chron.com

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