Last summer’s heat wave fuels a great year
The Houston merchant power company Calpine had a good year, reflecting the heat wave last summer in Texas that pushed power prices to historic highs.
Calpine, the nation's biggest generator of electricity from natural gas and a retail electric provider that sells power under the brand name Champion Energy, earned $770 million in 2019, a sharp increase from $10 million in 2018, according to reports Calpine files with securities regulators.
Calpine is Houston’s biggest private company, reporting $10.1 billion in revenue last year, up from $9.5 billion in 2018. The company has 2,300 employees, including 900 in the Houston area.
Company executives credited strong plant operations, solid and rising retail sales and skilled trading in electricity markets by the commercial operations teams for its performance.
“I am proud to report that 2019 was a record year, following a record setting 2018 with 2020 promising to be in between,” said Thad Hill, Calpine CEO and president.
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 recouping some of their investment.
Calpine paid the private equity firm a dividend of $1.15 billion from selling a power plant in Delaware and another in Wisconsin last year, and from cash on hand. It also paid investors a $20 million dividend in 2018.
Wide reach
Calpine owns 77 power plants that produce 26,035 megawatts of power across the country, including a plant under construction in Louisiana expected to generate 361 megawatts.
That wide geographical reach means the company is used to handling hurricanes, wildfires and floods. But Calpine has never experienced an emergency like COVID-19, which has affected every plant and office, said senior vice president and chief administrative officer Hether Benjamin Brown.
She credits solid business continuity planning, a focus on safety and hard work from plant employees to keep the lights on in the face of adversity.
Last year, Texas regulators made it easier for power companies to earn more during periods of tight supply and high demand by boosting a price adder that raises prices when power shortages loom. The wholesale price of power in Texas is capped at $9,000 per megawatt hour.
Calpine fine-tuned its operations heading into last summer to make sure its power plants were in peak form when the company needed them the most. Calpine reported to investors that it generated 100.8 million megawatt hours last year, 5 percent more than in 2018.
The company also inadvertently pulled open the curtain on data reliability problems plaguing the state grid manager, the Electric Reliability Council of Texas. In May 2019, an IT employee at Calpine erroneously sent data to ERCOT that some 4,000 megawatts of generation — enough to power about 800,000 Texas homes — were coming offline when temperatures were in the 90s.
For a few moments, the price of electricity on Texas' wholesale market soared from about $40 a megawatt hour to $9,000. A commodities trader in Houston estimated the error generated a multimillion-dollar windfall for power companies at the expense of industrial customers, power traders, and retail electric providers.
New rules
Calpine claimed responsibility and called on the grid manager to reprice the block of sales that occurred during that period. But ERCOT said repricing was not practical since such data errors occur frequently.
The dispute is still pending before the Public Utility Commission. ERCOT launched a review of data errors and announced new rules in June designed to better identify incorrect data and reduce the likelihood that incorrect information is used to calculate the amount of power available on the grid.