Major Project Rejected in Texas' Flagship Dispatchable Power Loan Program

The Texas Energy Fund (TEF), a flagship loan program designed to boost the state’s dispatchable generation, faced its first setback on Sept. 4 when the Public Utility Commission of Texas (PUCT) denied Aegle Power’s loan application for a 1,292-MW combined cycle generating facility in Harlingen—its second-largest shortlisted facility.

The PUCT said Aegle Power’s application, filed on May 28, failed the due diligence phase of the Texas Energy Fund (TEF) In-ERCOT Loan Program application process, rendering it ineligible to receive TEF funding.

Initially, the PUCT listed NextEra as a co-sponsor of the Harlingen project as it unveiled its shortlist of 17 TEF projects that would proceed to the due diligence phase on Aug. 29. However, in a Sept. 3 letter,  Mitchell Ross, NextEra’s vice president and general counsel, informed the commission that “NextEra’s name was submitted in the Aegle application without NextEra’s knowledge or consent.” NextEra is “not seeking funding as part of the TEF Program, is not participating in the project for which NextEra was named, and hereby requests that NextEra be immediately removed from PUCT records as a sponsor for the Aegle Power project,” he wrote. 

In a statement on Wednesday, the PUCT also noted it would pursue a “minimum” 10% reduction in a contract payment amount, which the agency owes to Deloitte, a TEF contractor that conducted the first round of application review.

The setback has ramped up concerns among some Texas legislators, who now appear to be scrutinizing the TEF program’s application process more closely. In a joint statement posted on X on Wednesday, state Sen. Charles Schwertner and state Rep. David Spiller, co-chairs of the Texas Energy Fund advisory committee, said they were concerned about the oversight and due diligence being applied to the program.

“The Senate and House have sent clear messages to the Public Utility Commission reemphasizing the importance of a deliberate, transparent, and prudent review process for Texas Energy Fund projects and that only the most qualified, competitive projects receive public funding. Adherence to those objectives is critical,” they wrote.

“On Tuesday, we learned that the Public Utility Commission and its contracted program manager, Deloitte LLP, advanced a problematic and unqualified application submitted by an energy executive who was publicly convicted of fraud in our state. The protection and stewardship of taxpayer money must be the highest priority.” The legislators have said they will work to address these concerns at the committee’s first hearing on Oct. 8.

Sixteen Projects Remain in Due Diligence Review

The PUCT’s denial of Aegle Power’s application means 16 gas-fired power projects—a combined 8,489 MW—remain on the regulator’s shortlist to advance to the TEF due diligence phase. When the PUCT unveiled its 17 selections on Aug. 29, it said these were whittled down from 72 loan applications—representing 38 GW of proposed new dispatchable generation that sought more than $24 billion in funding. The PUCT’s 17 original selections amounted to a requested loan total of $5.38 billion.

As POWER has reported, the remaining 16 projects are an assorted collection of gas plants. They include large-scale facilities like the 1,350-MW CPV Basin Ranch proposed by Competitive Power Ventures and GE Vernova, smaller peaking facilities, and other projects poised to serve growing demand or provide reliability. 

Table: While the Public Utility Commission of Texas (PUCT) on Aug. 29 selected 17 projects (representing a total of 9,781 MW of proposed new gas-fired dispatchable power generation projects), it denied one application on Sept. 4. This table shows the 16 projects that remain shortlisted as of Sept. 4. Source: PUCT/POWER

The selections marked a significant step for the TEF In-ERCOT Loan Program. Established by a constitutional amendment approved by Texas voters on Nov. 7, 2023, the loan program aims to shore up dispatchable generation—primarily new natural gas plants—to ensure it will have reliable generation to meet soaring demand projections. Senate Bill 2627, the Powering Texas Forward Act, funds the TEF with up to $5 billion in funding. 

The TEF loans, which must have a term of 20 years with an interest rate of 3%, may be used to either finance upgrades to existing dispatchable generation facilities that increase capacity by at least 100 MW or fund the construction of new dispatchable generation projects with a minimum capacity of 100 MW. Eligible new projects, notably, also qualify for a completion bonus grant of up to $120,000 per MW if interconnected by June 1, 2026, or up to $80,000 per MW if interconnected before June 1, 2029.

PUCT Reports Rigorous Selection for TEF Loans

As it unveiled its selections, the PUCT last week underscored that staff and the TEF administrator had assessed each of the applications individually, based on criteria outlined in the Public Utility Regulatory Act (PURA) and the PUCT’s rules. It said applications were evaluated “based on the applicant’s experience and strength of financing as well as the proposed project’s technical and financial attributes.”

In addition, commissioners outlined five priorities for developing its loan portfolio, including projects slated to advance to the next phase of the review process. These include: “diversity among applicant types, diversity in siting location, speed to market, ability to relieve transmission constraints, and diversity of generation resource type,” it said.

“PUCT staff’s assessment of each of the 72 applications was provided to the Commissioners. Staff also presented a recommended portfolio of applications that addressed the Commissioners’ five core priorities for advancement to due diligence,” it added.

During the “due diligence” phase, which is scheduled to span between four and eight months, the PUCT said its staff and Deloitte staff will “verify each project’s details, including, but not limited to participating companies, financial viability, construction plans, interconnection capabilities, ability to complete the project and ability to pay back the loan.” If successful, the commission will enter into a loan agreement with applicants. Initial loan disbursements could be awarded by Dec. 31, 2025, according to the PUCT.

However, “an application may be denied at any point in the due diligence process,” the PUCT underscored. “An applicant may also choose to withdraw their project. Those applications will then be removed from consideration by Commission order.” The PUCT noted that one or more projects from the pool of remaining applications could replace those that are removed from consideration.

On Wednesday, PUCT Executive Director Connie Corona suggested much more work remains. “We’re still a long way from selecting any company to receive a Texas Energy Fund loan. Proposed projects that have reached this stage have only met the initial requirements for applications,” she said. “We have a multi-stage application and verification process that gets more rigorous at every step to ensure only financially sound applicants with viable projects receive these loans.”

—Sonal Patel is a POWER senior editor (@sonalcpatel, @POWERmagazine).