Abbott announces that KPUB’s power plant is the first to receive funding

The Kerrville Public Utility Board has secured a $105 million low-interest loan from the state to build a 122-megawatt natural gas power plant, culminating years of strategic planning to protect local customers from volatile electricity markets.

Gov. Greg Abbott announced the loan agreement Thursday, marking the Rock Island Generation Project as the first funded under the Texas Energy Fund. The facility will be located in Colorado County, about 10 miles south of Columbus, and is expected to begin operations by June 1, 2027.

The project represents a fundamental shift for KPUB, which has purchased 100% of its power from external suppliers since leaving the Lower Colorado River Authority in 2012. Power supply costs account for 60% to 70% of KPUB’s annual operating budget.

“This marks a historic milestone for our utility and is the result of the dedication, vision, and countless hours of hard work from our board, staff, and partners,” said Mike Wittler, KPUB general manager and CEO. “We’re proudly powering forward with a long-term strategic initiative that will not only help shield our ratepayers from future market volatility but enhance grid reliability for all Texans.”

KPUB serves about 18,000 customers in Kerrville and surrounding areas of Kerr County. The utility approved the generation project in November after extensive analysis by multiple consulting firms and a customer survey showing 76% of nearly 1,000 respondents preferred KPUB invest in power generation to ensure stable rates.

The Public Utility Commission of Texas is providing the 20-year loan at 3% interest, with total project costs capped at $175 million. KPUB beat out dozens of other applicants, advancing as one of 16 projects selected for due diligence from 72 initial applications to the Texas Energy Fund’s loan program.

The timing is critical for KPUB. Its only load-following power purchase agreement with CPS Energy expires in December 2026, requiring the utility to develop new power supply strategies. Meanwhile, ERCOT officials project Texas will need an additional 40,000 megawatts of generation capacity by 2030 to meet surging demand from population growth and new technologies.

The natural gas peaking plant will generate revenue by selling power into the ERCOT market during high-demand periods when prices typically spike. This strategy aims to offset KPUB’s power purchase costs while providing a hedge against extreme price volatility during events like Winter Storm Uri in 2021.

“The goal of the Texas Energy Fund has always been clear: secure reliable, affordable power that will serve the state for decades to come,” said PUC Chairman Thomas Gleeson.

KPUB engaged multiple independent consultants to evaluate the project, including SEnergy, NewGen Strategies and Solutions, and Forvis Mazars. All concluded the plant would provide significant value and protection from market volatility for KPUB customers.

The facility will connect to the South Texas Electric Cooperative’s Rock Island substation, serving the broader ERCOT grid while generating revenue for KPUB ratepayers.

The PUC has 18 additional applications under review for the loan program, representing more than 9,100 megawatts of proposed new generation capacity across Texas.