Southern Power

Austin Energy reaches deal to acquire East Texas biomass plant

$460 million deal will save utility $275 million in costs over 13 years

April 18, 2019 - 8:15 pm

AUSTIN ( -- Austin Energy announced Thursday it will spend $460 million to acquire a biomass power plant in East Texas.

Southern Company, which owns the renewable Nacogdoches Generating Facility in east Texas, accepted the city's offer late Wednesday.

Austin Energy is in the middle of a 20-year contract that required escalating, annual payments regardless of whether the City actually bought energy from the 115-megawatt plant. By purchasing the plant, Austin Energy expects to save some $275 million between now and 2032.

"Acquiring the biomass plant relieves our obligation to make escalating capacity payments to a third party and, over time, reduces the associated cost impacts to our customers," said Jackie Sargent, Austin Energy’s General Manager. "This transaction is consistent with our efforts to manage our portfolio of generation resources in a responsible and cost-effective manner."

Austin Energy has been the plant's only customer since 2012, with the contract giving the utility access to 100 megawatts of renewable power. The plant has been used sparingly, given its cost to operate compared to other less-costly means of power production.

While Austin Energy will take ownership of the plant, no immediate changes to the operation of the facility are expected, and its long-term status will be addressed in Austin Energy’s future resource planning efforts.

Austin Mayor Steve Adler praised the outcome. "Saving $275 million is a great result! We play the hand we’re dealt, and here it means we’ll be able to provide value for our customers and maintain leadership on renewable sources of power. We’ve been working since I got into office to get a better financial deal around the biomass plant."

The utility has set a target of offsetting 65 percent of customers' energy needs with renewable resources by the year 2027. Last year, officials say the utility's renewable efforts amounted to 38 percent of the energy used by customers.

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