Dive Brief:

• Vistra Energy and Dynegy are in advanced talks to merge, the Wall Street Journal reports, and could finalize plans as early as this week to form one of the nation's largest independent power producers. 
• Vistra, the generation company that emerged from bankruptcy proceedings of Energy Future Holdings, owns Texas power producers TXU Energy and Luminant. The Journal first reported in May that the two companies were in talks to combine, and the paper warns discussions could still fall apart before a deal is reached.
• Adding Dynegy's 50 plants in Texas, the Midwest and Northeast would give Vistra more than more than 46 GW of capacity, RTO Insider noted in the spring, surpassing NRG Energy, which claims to be the largest IPP in the country.

Dive Insight:

As low natural gas prices and stagnant load growth squeeze the finances of independent generators, many are looking to consolidate. 

Back in August, Energy Capital Partners acquired generator Calpine for $5.6 billion after the power producer reported significant losses in the second quarter. ECP, a private equity firm, gained generation assets in Texas, 18 other states and Canada. 

Now Vistra is getting in on the acquisition action. The company, which owns TXU Energy and Luminant, emerged from Energy Future Holdings bankruptcy proceeding last year and then rebranded to Vistra in November.  

Luminant, Vistra's competitive generation arm, has about 17,000 MW of generation in Texas, including 2,300 MW of nuclear, 8,000 MW of coal generation and 6,000 Mw of natural gas. The company says it is also a large purchaser of wind-generated electricity.

The deal is noteworthy not only for the sheer volume of capacity, but also the location of company assets.

Dynegy has only 15% of its 50 plants located in the Electric Reliability Council of Texas market, one where generators have been especially pressured by low power prices. 

Earlier this year, Panda Temple Power, a gas plant that entered service in 2014, filed for bankruptcy and sued ERCOT for misrepresentation in its market outlook reports. And just this month, Luminant announced it would close two major Texas coal plants, potentially dipping the ERCOT reserve margin below its target. 

In May, Calpine and NRG proposed changes to market rules to increase the frequency of scarcity pricing events — changes Texas regulators announced they would consider. 

Dynegy's plants are not immune to the pricing pressures, however. The company is considering an exit of the MISO Zone 4 market in southern Illinois after the state passed nuclear energy subsidies earlier this year — a move that could see it shed up to 5.5 GW of coal capacity. 

Dynegy officials say the coal plants cannot compete with the subsidized nuclear generation and has signed on to challenges to the subsidies in federal court and at the Federal Energy Regulatory Commission. The company and other IPPs have also spoken out against the Department of Energy's proposed rule to provide cost recovery to merchant coal and nuclear plants. 

In addition to Luminant, Vistra also owns retail supplier TXU Energy, which serves 1.7 million customers in Texas. Vistra says it continues to see increased demand for renewable energy from retail customers, and has acquired a 180 MW solar development project located in West Texas which is expected to be operational in the summer of 2018. TXU has also launched a "Free Nights and Solar Days" offering, combining its most Right Time Pricing PlanSM with solar energy.