Under terms of the funding agreement, the developers of a 122-megawatt natural gas-fired facility in Colorado County west of Houston will have access to a 20-year loan of up to $105 million.
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The Public Utility Commission has funded the first electric plant project under the state’s Texas Energy Fund, the sometimes-controversial dispatchable generation financing program created by the Texas Legislature in 2023.
Under terms of the funding agreement, the developers of a 122-megawatt natural gas-fired facility in Colorado County west of Houston will have access to a 20-year loan of up to $105 million at a 3 percent interest rate. The total project cost cannot exceed $175 million.
Gov. Greg Abbott announced the loan on June 26. In a release, the governor noted that the project — it’s known as the Rock Island Generation Project — will connect to a substation in ERCOT’s South Load Zone, which is adjacent to the state’s largest electricity demand centers around Houston. The Kerrville Public Utility Board will develop the facility.
“Today, Texas made a 122 megawatt investment in power capabilities of the grid to ensure that Texans have access to affordable and reliable power,” Abbott said.
TEF has as its primary purpose the promotion of new dispatchable generation resources statewide, both inside and outside the ERCOT footprint. The PUC oversees four discrete grant and low-interest loan programs under TEF. Here’s an update on the progress of each:
In-ERCOT Generation Loan Program
Other than the Rock Island project, PUC staff and the TEF administrator are reviewing 18 loan applications under the In-ERCOT Generation Loan Program. If approved, these proposed projects would provide 9,592 megawatts of on-demand power generation to the ERCOT grid, with loan amounts totaling $5.15 billion.
Outside of ERCOT Grant Program
On May 28, the PUC officially launched the Outside ERCOT Grant Program and began accepting applications. The PUC recently announced that four applications totaling $351.3 million have been submitted and are under review. This program funds operational and maintenance for transmission and distribution infrastructure or electric generating facilities in Texas, but outside the ERCOT region.
Completion Bonus Grant Program
On Apr. 24, the PUCT issued the first notice of eligibility to a Completion Bonus Grant Program applicant. The PUC also has stated that seven applications totaling $130.4 million had been submitted under this program, which provides bonus grants for ongoing dispatchable electric generation projects.
Backup Power Package Program
PUC staff are reviewing public, stakeholder, and industry input and research as they develop the Backup Power Package program.
Early Controversy
Lawmakers created the Texas Energy Fund in 2023 with a $5 billion appropriation, and then lawmakers doubled that appropriation to $10 billion in 2025. However, one of the first loan applications tentatively accepted by the PUC in 2024 appeared to have been submitted fraudulently. The embarrassing early misfire prompted both Gov. Abbott and Lt. Gov. Dan Patrick to call for reforms. The PUC also amended its vetting practices as a result.