The Rock Island Generation Project, a planned 122-megawatt natural gas power plant in southeast Texas.. It is the first project to receive a state-backed loan from the Texas Energy Fund (TEF).
Location: The plant will be located in Colorado County, approximately 80 miles west of Houston and 10 miles south of Columbus, Texas. This places it near one of the state’s largest electricity demand areas within the Electric Reliability Council of Texas (ERCOT) grid.
Purpose: The natural gas-fired plant is designed to provide “dispatchable” power, which can be turned on quickly to meet energy demands and stabilize the grid.
Timeline: The project is scheduled to begin commercial operations by 2027
Financing
Source: The project is being financed by the Kerrville Public Utility Board (KPUB). The loan was approved in June.
Texas Energy Fund: KPUB is receiving a 20-year loan of up to $105 million through the state’s TEF program. The loan has a 3% interest rate and was approved by the Texas Public Utilities Commission. The TEF is a $10 billion program created to incentivize the construction of new power sources.
This is a landmark occasion for our utility,” KPUB CEO Mike Wittler exclaimed. “It allows us to move forward with a project that increases grid reliability and protects our customers from market price volatility.”.
The Texas Energy Fund
The Texas Energy Fund, created by the legislature in 2023 and approved by voters in a constitutional amendment, is designed to accelerate development of firm, on-demand power generation across the state. KPUB will receive a 20-year loan at a 3% interest rate, financing roughly 60% of the project’s estimated $175 million cost under the deal.
The development, located about 10 miles south of Columbus, is in close proximity to the South Texas Electric Cooperative’s Rock Island Substation within the ERCOT South Load Zone. Its proximity to the Houston metropolitan area; one of the country’s fastest-growing electricity markets—makes it a strategically valuable addition to the state grid.
When operational, the plant will have six high-efficiency natural gas engines that have the ability to ramp up quickly in the event of peak demand or emergency circumstance. That kind of flexibility is becoming more useful in Texas, where hot summers, rapid population growth, and the advent of intermittent renewable energy have placed extra pressure on the power system.
The Rock Island generation project is exactly the kind of project we envisioned when the Energy Fund was created,” said Thomas Gleeson, Chairman of the Public Utility Commission of Texas. “It brings new dispatchable capacity onto the grid and helps ensure the reliable, affordable electricity Texans need to thrive.”.
Approved Loans
As of October 14, 2025, the Texas Energy Fund (TEF) has approved four loans for natural gas power plants in Texas. These loans are intended to add new, dispatchable generation to the ERCOT grid.
- Rock Island Generation Project: Approved in June 2025, the project, developed by the Kerrville Public Utility Board (KPUB), received up to a $105 million loan for a 122 MW natural gas plant in Colorado County.
- NRG facility in Houston: A loan was approved in August 2025 for a 456 MW natural gas facility at NRG’s existing TH Wharton Generating Station. It is expected to begin operations in the summer of 2026.
- NRG facility in Chambers County: In September 2025, another NRG project received a $562 million loan for a 721 MW natural gas facility at its Cedar Bayou Generating Station.
- Calpine facility in Freestone County: A loan for a 460 MW natural gas power plant was announced in October 2025. It will be built by Calpine Corporation and is estimated to begin generating power before summer 2026.
Expected construction start
Construction will begin later this year, with initial activities focusing on site preparation, final engineering, and equipment procurement. KPUB has partnered with Sky Global Partners as project developer, Summit Industrial Construction as contractor, and MAN Energy Solutions as engine provider. Kinder Morgan will secure gas supply for the facility under a firm, no-notice contract.
In addition to improving grid reliability, the Rock Island generation project will introduce up to 200 construction jobs and millions of dollars in new local tax revenue to Colorado County. When complete, it will provide long-term price stability for KPUB’s 24,500 customers. Who currently rely on market-based energy purchases for a substantial portion of their electricity.
“This is not only about one utility,” Wittler added. “It’s about building a stronger, more resilient grid for all Texans.”
The Rock Island generation project is the first to receive money under the Energy Fund’s In-ERCOT Generation Loan Program. But state officials say more approvals are on the way. With demand still growing and pressure on the ERCOT grid building, the fund should be a key player in the construction of Texas’s power infrastructure over the coming years.
Current status
As of July 2025, the project was in the procurement phase. Construction firms are awaiting a tender to bid for the engineering, procurement, and construction (EPC) contract.
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Rock Island Generation Project Factsheet
Capacity: 122 megawatts
Technology: Natural gas-fired power plant with six high-efficiency engines
Location: Colorado County, Texas (10 miles south of Columbus)
Expected Online Date: 2027
Financing
Total Project Cost: $175 million (estimated)
Loan Amount: $105 million (60% of total cost)
Loan Terms: 20-year term at 3% interest rate
Funding Source: Texas Energy Fund (first project approved)
Developer & Key Partners
Owner: Kerrville Public Utility Board (KPUB)
Project Developer: Sky Global Partners
Contractor: Summit Industrial Construction
Equipment Supplier: MAN Energy Solutions
Gas Supplier: Kinder Morgan
The Rock Island Generation Project Strategic Significance
Grid Connection: ERCOT South Load Zone via Rock Island Substation
Market Focus: Houston region electricity demand
Purpose: Fast-start, dispatchable power for grid reliability
Customers Served: 24,500 KPUB customers
Economic Impact
Construction Jobs: Up to 200 temporary positions
Local Benefits: Millions in new tax revenue for Colorado County
Customer Benefits: Long-term price stability for KPUB ratepayers
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