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! January 2013 !
Legislative advertising paid for by: John W. Fainter, Jr. President and CEO Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 Austin, TX 78701 phone 512-474-6725 fax 512-474-9670 www.aect.net
AECT Principles!
AECT is an advocacy group composed of member companies committed to: - Ensuring a modern, reliable infrastructure for the supply & delivery of electricity. - Supporting efficient competitive markets that are fair to customers and market participants. - Supporting consistent and predictable oversight and regulation that will promote investment and ensure the stability of Texas electric industry. - Promoting an economically strong and environmentally healthy future for Texas, including conservation and efficient use of available resources. AECT member companies remain dedicated to providing Texas customers with reliable service and are committed to the highest standards of integrity.
The Association of Electric Companies of Texas, Inc. (AECT) is a trade organization of investorowned electric companies in Texas. Organized in 1978, AECT provides a forum for member company representatives to exchange information about public policy, and to communicate with government officials and the public. For more information, visit www.aect.net.
FERC NERC
(ERCOT)
Generation Companies
Contents!
Slide 7: Slide 26: Slide 39: Slide 49: Slide 54: Slide 64: Slide 76: Slide 86: Slide 94:
AECT Member Companies Electric Market Structures in Texas Texas Wholesale Electric Market ERCOT Generation Mix Types of Generation: Benefits and Challenges Emissions and the Environment Transmission and Distribution Utilities Energy Efficiency Competitive Retail Electric Market in ERCOT
6 !
7 !
AEP SWEPCO!
Southwestern Electric Power Company, headquartered in Shreveport, LA, serves 460,000 customers in East Texas and the Texas Panhandle, Northwest Louisiana, and the western edge of Arkansas. SWEPCO has been providing low-cost, reliable electricity to customers since 1912. SWEPCO is a vertically integrated company operating as a member of the Southwest Power Pool.
8 !
AEP Texas!
AEP Texas is connected to and serves more than 900,000 electric consumers in the deregulated Texas marketplace. As an energy delivery company, AEP Texas delivers electricity safely and reliably to homes, businesses and industry across its nearly 100,000 square mile service territory in south and west Texas.
9 !
CenterPoint Energy!
CenterPoint Energy maintains the wires, poles and electric infrastructure delivering service to more than 2 million consumers in its 5,000-square-mile electric service territory in the Houston metropolitan area. While CenterPoint Energy employees ensure the reliable delivery of electricity from power plants to homes and businesses, the company neither generates power nor sells it to retail customers.
10 !
Constellations retail companies serve more than two-thirds of the Fortune 100, approximately 100,000 business and publicsector customers and approximately 1 million residential customers across the nation. Constellations retail brands include Constellation NewEnergy, Division, StarTex Power and BGE Constellation NewEnergy Gas HOME. In Texas, Constellations retail entities serve over 150,000 residential and business customers.
Competitive Areas of Texas
11 !
El Paso Electric is a vertically integrated utility serving approximately 380,000 customers in the Rio Grande Valley in west Texas and southern New Mexico. El Paso Electric is an operating member of the Western Electricity Coordinating Council.
12 !
Entergy Texas!
The Entergy Texas service area starts at the southeast Texas/Louisiana border and stretches up into the piney woods of east Texas, down to the Gulf of Mexico and across to the lake country north of Houston. Entergy Texas serves approximately 385,000 customers in 26 counties.
13 !
Exelon Generation!
Exelon Generation owns and controls about 34,650 megawatts of electricity generation capacity from a diverse portfolio that includes the nations largest fleet of nuclear power plants. The company maintains strong positions in the Midwest and MidAtlantic regions. In Texas, it owns and controls about 4,400 MW of natural gasfired and wind generation, with plants in Dallas, Fort Worth, Granbury, LaPorte, Odessa and Wharton
14 !
GDF SUEZ!
GDF SUEZ owns nearly 15,000 MW of electricity generation nationwide, including over 4,000 MW in Texas. The company employs 500 Texans and maintains its North American headquarters in Houston. GDF SUEZ has a diverse portfolio of generation, including 589 MW of operational wind, hydro and biomass facilities nationwide.
15 !
Green Mountain Energy Company is the nations leading competitive retail provider of cleaner energy and carbon offset solutions. The company has two primary business units: residential and commercial energy. Green Mountain offers retail customers in competitive markets in Texas cleaner energy via direct access retail electric service.
Competitive Areas of Texas
16 !
Lone Star Transmission, a subsidiary of NextEra Energy, has received approval to construct, operate and maintain Competitive Renewable Energy Zone transmission facilities in Texas. The company is building a 320mile-long transmission facility that will increase reliability and lower prices for Texas consumers.
17 !
Luminant!
Luminant is a competitive power generation business, including mining, wholesale marketing and trading, construction and development. It has over 18,300 MW of generation in Texas, including 2,300 MW of nuclear and 5,800 MW of coal-fueled generation capacity, and is the largest purchaser of wind-generated electricity in Texas and fifth largest in the U.S.
18 !
NextEra!
Electric Generation Company!
NextEra Energy Resource owns an extremely diverse portfolio of nearly 18,000 MW of generation nationwide, including wind, solar, hydro, natural gas, and nuclear power. In Texas, NextEras footprint includes 5,243 MW of generation, including two combinedcycle natural gas plants and 15 wind facilities.
19 !
NRG Energy!
NRG Texas is the second largest electrical generator in Texas with more than 1,100 professional employees operating a diverse generation portfolio of almost 11,000 megawatts of power.
20 !
Oncor!
Oncor is a regulated electric distribution and transmission business that delivers reliable electricity to consumers. Oncor operates the largest distribution and transmission system in Texas, providing power to more than 3 million electric delivery points over more than 115,000 miles of transmission and distribution lines.
21 !
Reliant Energy!
Reliant Energy, Inc., based in Houston, Texas, provides electricity and energyrelated products to more than 1.8 million retail and wholesale customers in Texas and in the Mid-Atlantic Region. As one of the largest electricity providers in Texas, Reliant works hard to provide its customers with competitive electric prices, innovative products and unmatched customer service for their homes and businesses.
Competitive Areas of Texas
22 !
Currently, TNMP provides electric service to 76 cities and more than 230,000 customers throughout Texas. TNMP is owned by PNM Resources, an energy holding company based in Albuquerque, New Mexico.
23 !
TXU Energy!
TXU Energy is a market-leading competitive retailer that provides electricity and related services to more than 2 million electricity customers in Texas. TXU Energy offers a variety of innovative products and solutions, including 24/7 customer service, competitively priced service plans, energy efficiency options and renewable energy programs.
Competitive Areas of Texas
24 !
Xcel Energy!
Xcel Energy owns Southwestern Public Service Company, a regional electric utility that provides service to about 400,000 persons in a 45,000 squaremile area comprised of the South Plains and Panhandle of Texas, and eastern New Mexico.
25 !
26 !
1975
Inflation, construction costs and fuel costs drive electricity rates up. 64th Texas Legislature enacts Public Utility Regulatory Act (PURA) to implement state regulation of electric utility service and rates (Cities permitted to retain original jurisdiction). Service area, transmission line and generating plant certification. Rate regulation (based on cost of service plus reasonable return on investment). Rates based on historical test year costs and original costs of infrastructure, less depreciation. Service quality regulation. Customer protection.
27 !
28 !
Jan. 2005
Jan. 2002 July 2001
Texas Choice pilot program begins Retail choice begins in ERCOT Affiliate REPs allowed to offer nonprice-tobeat prices
Sept. 1999
ERCOT Electric rates frozen
29 !
Wholesale and Retail Electric Competition Were Passed ! With Broad, Bipartisan Support!
Senate Bill 373, which opened the wholesale electricity market in Texas, passed in 1995 when the Democrats were the majority party in the House and Senate.
The Speaker of the House and the Lieutenant Governor were both Democrats, and the bill sponsors and authors were both Democrats.
It was a bipartisan measure: 74 of the Aye votes were from Democrats, while 68 were from Republicans.
The bill passed the Senate with a vote of 28 Ayes and 3 nays.
30
Allowed non-utility wholesale market participants to offer market-based prices in ERCOT. Deregulated electric cooperative distribution rates.
Note: Non-ERCOT areas are subject to FERC jurisdiction for wholesale services, including transmission services.
31 !
32 !
Affiliated retail electric providers Required to lower base rates by six percent (Price to Beat)
Adjustable only for increases in natural gas prices Price to Beat remains in place until 12-31-06
33 !
Structural Unbundling!
Incumbents required to separate business activities into the following units.
Power generation company. Retail electric provider. Transmission and distribution utility.
Transmission and distribution businesses remain regulated utilities. Methods for separation of business activities.
Creation of separate non-affiliated companies. Creation of separate affiliated companies owned by a common holding company. Sale of assets to a third party.
Each ERCOT utility chose different models. Code of conduct rules enforce separation requirements.
34 !
ERCOT: Separate companies provide retail, transmission & distribution and generation services!
In competitive markets, consumers have multiple retail electric providers (REPs) and service plans to choose from. Wholesale and retail prices are set by competitive market forces, while the PUC sets transmission and distribution rates.
35
ERCOT: Separate companies provide retail, transmission & distribution and generation services!
Because wholesale electric prices are set by the competitive market, the risks associated with the cost of construction, operations and maintenance of a generation plant are borne entirely by the generator and its investors, not by end-use customers.
36
Outside ERCOT: A single company provides retail, transmission & distribution and generation services in each area!
In fully regulated markets, the PUC sets retail rates charged to end-use customers. Each of these service areas is part of multi-state electric grids, with differing regulations. In many cases, vertically integrated utilities purchase wholesale power from certain unregulated entities.
37
Outside ERCOT: A single company provides retail, transmission & distribution and generation services in each area!
New power plants in these regions can be built by both regulated entities and certain unregulated entities or qualifying facilities. Regulated utility power plants, however, must be approved by the PUC after a rigorous review of need and siting.
38
39
41 !
System Reliability
ERCOT oversees system reliability. ERCOT is part of national reliability council. ERCOT protocols, approved by PUC, mandate system reliability standards that all market participants must follow.
Statute and Rules Address Market Power and Generation Merger Issues
Independent Market Monitor oversees wholesale market operations. Generating capacity owned and controlled by a Power Generation Company limited to 20% of installed generating capacity capable of delivering power to a power region. Administrative penalties for market power abuse were reviewed and updated during the 79th Regular Session. Mergers of Power Generation Companies subject to PUC review.
Market Design
ERCOT will transition to a Nodal Market in 2009 as a result of PUC rulemaking. The change is expected to bring cost-savings and additional efficiency to the market by enhancing market transparency and allocating costs more accurately to market participants.
42 !
System Reliability
Larger, multi-state Councils (SERC, SPP, WECC) oversee system reliability. Each is part of national reliability council. Protocols, approved by the Federal Energy Regulatory Commission (FERC), mandate system reliability standards that all market participants must follow.
43 !
40
To meet increases in electric load created by Texas rapid population and economic growth, Texas will require additional power, transmission and distribution, customer demand response and energy efficiency.
1980-2040
37.0 million 32.9 million 28.9 million 25.1 million 20.9 million 17.0 million 14.2 million
2030
2040
Note: The peak in electric consumption in 2000 was due to an exceptionally hot summer.
Source: ERCOT, Report on Existing and Potential Electric System Constraints and Needs, January 2012
45 !
Source: ERCOT, Report on Existing and Potential Electric System Constraints and Needs, January 2012
46 !
90-97
addi1ons:
5
GW
Enabling
Legisla1on
98-11 addi1ons: 47 GW
The competitive market has steadily added new generation and greater efficiency to the wholesale market. Generators in the competitive market shoulder the risk of building new power plants, bringing efficient, costeffective generation to consumers.
47 !
In rate base
ERCOT Forecasts That Reserve Margins Will Decline Below Target Levels
ERCOT
summer
reserve
margin1
2002-2017E;
percent
Historical
forecasts2
Dec
2012
forecast
13.75%
target
reserve
margin
provides
a
buer
against
de-rates,
forced
outages,
wind
variability,
forecast
error,
and
weather
related
spikes
1
Based
on
ERCOT
Capacity,
Demand
and
Reserves
(CDR)
Reports,
as
amended
2
Historical
reserve
margins
based
on
projecAons
for
each
year
prior
to
summer
peak
season,
based
on
the
formula
in
eect
at
the
Ame
3 CAISO is the California Independent System Operator; MISO is Mid-West ISO; NYISO is New York ISO; PJM is ISO for13 state region including PA, NJ, MD.
49
The generation technology mix is an outcome of a robust competitive wholesale market and environmental policy decisions. In addition to the price of fuels and the cost of technology, environmental and siting issues impact choices made by generation developers. Coal, including lignite, is an important fuel in the ERCOT electric generation mix. Coal is the most abundant fossil fuel in the United States, with an estimated 200 year supply remaining (per the Energy Information Administration (EIA)). Electricity produced from Texas lignite exceeds the entire generation of 28 states individually.
Texas lignite accounts for about 45% of the coal used in the state for electricity. Texas lignite mining industry is a key part of the state economy, providing over 33,000 permanent jobs and contributing about $10.5 billion in annual Total Expenditures.
50 !
50000
50000
40000
MW Load
MW Load
40000
30000
30000
20000
20000
10000
10000
There are multiple types of power plants with different operations in ERCOT that are operated on different schedules.
Because of their lower marginal costs, nuclear and coal-fired power plants in ERCOT operate approximately 90 percent of the time. In contrast, natural gas-fired power plants are ramped on and off, depending upon demand. Wind-generated electricity is only intermittently available, depending on wind conditions.
Some natural gas-fired generation is required to operate at all times in the ERCOT region to meet demand.
Natural gas-fired generation sets the market price of wholesale electricity in ERCOT. Natural gas-fired units that are used to meet peak demand tend to be older units that cost more to operate.
51 !
In ERCOT, generation companies assume all of the financial risk included in a new generation projects. The decision to build new generation thus depends upon whether the generator believes the electricity can be sold at a price to recoup construction costs, cover operations and maintenance costs and achieve a profit. Market forces have been effective in bringing new generation to the state, with 52,470 MW of generation constructed since the advent of wholesale competition in 1995. While not all is expected to the built, the PUC reports substantial new generation has been announced, including: 7,321 MW of new coal-fired generation 5,900 MW of new nuclear generation 9,515 MW of new wind-powered generation 9,430 MW of new natural gas-fired generation Though such news is positive, market forces and legislative and regulatory certainty will ultimately dictate how much of the announced new generation is actually built.
Data source: PUC, New Electric Generating Plants in Texas, updated December 30, 2011
52 !
10929
10000
8000
6000
4570
4000
4536 3153
3055
2717
2699
2000
TX
CA
IA
OR
IL
MN
WA
OK
KS
CO
54
Wholesale Market
55 !
Coal-Fired Generation
Type of Generation + Coal-fired plants provide baseload generation, by running approximately 90 percent of the time. Environmental Issues - Greater air emissions than natural gas-fired plants, including rate of about twice the CO2 per kWh generated. - Risk of higher costs due to future carbon-capture requirements. Cost of Construction and Fuels + Currently, pulverized coal generation is economical to build based on current natural gas prices. + Long-term domestic supply of coal, including lignite. + Fuel cost is relatively low - High initial capital costs relative to natural gas-fired plants.
56 !
Type of Generation - Natural gas plants, such as combined-cycle plants, can provide baseload generation, but demand conditions in ERCOT result in a lower capacity factor than for coal-fired or nuclear-powered generation. + Other simple-cycle natural gas plants have quick start-up and shut-down times to allow them to meet peak demand. Environmental Issues + Lowest air emissions among fossil fuels. + Newest power plants operate more efficiently, burning less fuel per MWh of generation. Cost of Construction and Fuels + Low initial capital costs. - When natural gas prices are high, gas-fired power plants are expensive to operate.
57 !
Nuclear-Powered Generation
Type of Generation + Nuclear-powered plants provide baseload generation by running approximately 90 percent of the time. Environmental Issues + No air emissions. - Long-term storage of waste needs to be implemented. - Historic concerns regarding public perception of safety of nuclear power. Cost of Construction and Fuels + Lowest fuel cost of all large-scale generation. - High capital costs. - Longest permitting and construction times among generation types.
58 !
Wind-Powered Generation
Type of Generation + Wind is plentiful in certain parts of Texas. - Wind blows intermittently, making it a less reliable power source. Environmental Issues + No air emissions. - Can affect migratory birds. - Concerns about aesthetic impact. Cost of Construction and Fuels + No fuel cost. - Limited ability to replace other generation to satisfy reserve margins. - Imposes other costs on the system, such as increased ancillary service requirements, backup capacity and the need for transmission lines to reach rural wind farms.
59 !
Solar Generation
Type of Generation + Solar power is generally reliable, but intermittent, as it depends on certain levels of sunlight. - Plants are generally small in scale. Environmental Issues + No air emissions. - Large areas of land needed for effective solar arrays. Cost of Construction and Fuels - Can have 15 to 20 times the capacity cost of natural gas-fired generation + No fuel cost. - Cannot be used to replace other generation to satisfy reserve margins. - Imposes other costs on the system, such as the need for transmission lines, since large-scale solar power plants would be located in areas far from population centers.
60 !
Type of Generation + Biomass and landfill gas generation generally operates reliably. - Plants are generally small in scale. Environmental Issues - Plants burning biomass can have high CO2 emissions. + Landfill gas facilities reduce methane greenhouse gas emissions. - Generation is difficult to permit and site. Cost of Construction and Fuels - Requires high capital and operating costs when compared with fossil fuel-fired generation - Often located far from population centers, requiring high transmission costs
61 !
Hydroelectric Generation
Type of Generation + Hydroelectric power is reliable to operate, except during drought. - Texas has very little potential for new hydroelectric power generation. Environmental Issues + No air emissions. - Can kill fish. Cost of Construction and Fuels + Once built, hydroelectric power is among the least expensive forms of power, as it has no fuel costs. - High capital costs
62 !
Type of Technology + Several cost effective solutions available. - Success requires broad implementation. Environmental Issues + Reduces emissions that would otherwise accompany fossil fuel usage.
Cost of Construction and Fuels + Can improve cost levels for residents and customers. + Reduces need for building new power supply.
63 !
64 !
0.347 NM
0.237 OK
0.194 AR
0.095 TX
0.137 LA
Area National
EPA Clean Air Markets Division 2010 Acid Rain Program Data
Texas
Electric GeneratorNOx Reductions Achieved Under TCEQ 1-hr Ozone SIP Rules!
HGA SIP- 86% overall reduction from 1997 DFW SIP- 88% overall reduction from 1997 Beaumont SIP- 45% reduction from 1997 East Texas SIP- 51% reduction from 1997
Between 2000 and 2005, electric generating companies in Texas spent over $1 billion on NOx emission reductions alone.
66 !
Texas Electric Generating Plants Among Cleanest NOx Emitters in the Nation!
0.7
0.6
0.5
NOx (lb/MMBtu)
0.4
0.2
0.1
Source: 2011 EPA Air Markets Program Database, Acid Rain Program Only
SD NM ND UT NE OK DC WY KS CO PA MT IN MI IA KY AR VA AZ OH MN WA MO MD MS WV IL NC GA LA WI AL TN DE SC OR NH TX NY NV FL VT NJ MA ID ME CT RI CA 67 !
Texas Electric Generating Plants Among Cleanest SO2 Emitters in the Nation!
1 0.9 0.8
SO2 (lb/MMBtu)
Source: 2011 EPA Air Markets Program Database, Acid Rain Program Only
OH DC SD IN NH ND MI TN NE KY PA IA MO GA IL WI AL VA AR DE SC OK OR TX MD LA MS WV WY NC MN KS MA CO MT NY UT FL AZ NM NV NJ WA ME CT CA RI ID VT 68 !
Texas
261,232 mi2 268,483,093 426,270 143,905 5.6
69 !
Sources: CO2, NOx, SO2: 2011 Acid Rain Database; Mercury: EPA 2010 TRI database; Land Area: US Census Bureau, 2010. Sept 2012
The dollars of gross product produced in Texas per ton of CO2 emitted is high, and it increased by more than 1000% between 1963 and 2001.2 The amount of CO2 emitted per MWh of electricity generated in Texas is lower than that of half of the states that have more than a nominal amount of coal-fired or oilfired electricity generation.3
1Source: 2Source: 3Source:
EIA, 2008 State Electricity Profiles Global Warming: What Should Texas Do? Texas Public Policy Foundation, April 2007 EPA Acid Rain Database, 2009
70 !
Sulfur Dioxide (SO2) Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 lb./mmBtu Nation Texas 1.088 0.526 1.103 0.535 1.093 0.524 1.055 0.482 0.999 0.481 0.875 0.381 0.843 0.385 0.793 0.384 0.815 0.389 0.779 0.353 0.753 0.349 0.702 0.338 0.644 0.32 0.564 0.315 0.458 0.309 0.387 0.304
Nitrogen Oxides (NOx) lb./mmBtu Nation Texas 0.537 0.319 0.53 0.325 0.509 0.311 0.481 0.307 0.441 0.284 0.399 0.261 0.373 0.221 0.348 0.173 0.321 0.143 0.286 0.124 0.268 0.116 0.255 0.111 0.237 0.103 0.222 0.103 0.159 0.098 0.156 0.095
Carbon Dioxide (CO2) lb./mmBtu Nation Texas 198.35 160.3 196.74 174.81 194.01 172.69 191.37 167.43 191.27 168.78 191.40 166.37 189.71 165.97 188.54 166.01 189.62 168.93 188.08 166.96 187.17 166.51 186.27 165.75 184.92 166.36 186.43 171.65 183.88 166.20 183.68 169.25
71 !
EPA Clean Air Markets Division 1995- 2010 Acid Rain Program Data
Technology
Target
Load Growth ~ +1.05%/yr 55 GWe by 2030 15 GWe by 2030 No Heat Rate Improvement for Existing Plants 40% New Plant Efficiency by 20202030 None None < 0.1% of Base Load in 2030
Load Growth ~ +0.75%/yr 100 GWe by 2030 64 GWe by 2030 1-3% Heat Rate Improvement for 130 GWe Existing Plants 46% New Plant Efficiency by 2020; 49% in 2030 Widely Deployed After 2020 10% of New Light-Duty Vehicle Sales by 2017; 33% by 2030 5% of Base Load in 2030
On August 21, a federal court vacated the Cross-State Air Pollution Rule (CSAPR), which would have required generation units to significantly reduce emissions on a short time frame.
- CSAPR would have impacted the ability of many coal-fired generation units in Texas to operate, creating additional resource adequacy concerns.
On September 13, a federal court agreed to hold in abeyance challenges to the EPA's Mercury and Air Toxics (MATS) standards while the agency reconsiders parts of the rulemaking.
73 !
AECT member companies help to improve our environment through stewardship, support for new technologies and partnership with other agencies.
Environmental Stewardship!
- Reducing releases of chlorofluorocarbons from
electrical equipment - Recycling coal combustion products - Educating schools and communities about renewable energy - Designating land and reservoirs for public recreational use - Preserving and restoring forests by planting millions of trees - Helping other industries adopt pollutionprevention plans - Launching education campaigns to help communities save energy - Creating wetlands and wildlife habitats on company properties - Reclaimed water utilization - Offering renewable energy products to retail customers
Environmental Partnerships
!
- Energy Star - Energy Smart Schools - Environment Research Program - EPA SF6 Partnership program - Mickey Leland Internship Program -TCEQ Teaching Environmental Science - Green Lights - Habitat Protection - Learning From Light! - Millennium Council - Million Solar Roofs - National Energy Education Development (NEED) Project - Natural Gas Star
74 !
The electric industry is among the most heavily regulated in the nation, complying with hundreds of regulations and paying millions of dollars in fees annually.
76 !
77 !
ERCOT Transmission
1995 amendments to the Public Utilities Regulatory Act (PURA) required PUC to ensure open access to transmission grid, allowing new independent generators to utilize transmission network. TX76RSB 7 adopted postage stamp transmission pricing structure and eliminated impact of location on transmission rates. Transmission Cost of Service (TCOS) ratemaking structure implemented and billed to distribution service providers (DSP).
DSPs recover TCOS through the TDSP delivery rate and transmission cost recovery factor (TCRF), approved by PUC.
New transmission investment is coordinated through the ERCOT regional transmission planning process and requires PUC facility certification.
78 !
Since 2010, TDUs have invested about $870 million in the ERCOT transmission grid. ERCOT estimates that the electric grid will require adding or improving 6,693 circuit miles of transmission lines at a cost of almost $8.7 billion from 2012 through 2017 and beyond. This investment includes the cost of integrating Competitive Renewable Energy Zones (CREZs) into the competitive ERCOT market.
79 !
Source: ERCOT, Report on Existing and Potential Electrical System Constraints and Needs, January 2012
According to the Texas State Data Center, 5 million new residents are expected in Texas by 2020. New generation must be delivered effectively and efficiently to population centers of the state. Texas must provide regulatory certainty and fair rates of return to ensure appropriate capital investment. Though not shown here, areas of Texas located outside the ERCOT grid are also growing, both in terms of population and economic development.
Source: ERCOT, Report on Existing and Potential Electric System Constraints and Needs, January 2012 80 !
While certain types of generation can be constructed quickly -- often as short as 12-18 months -- transmission lines typically take between three and five years. Generation can be brought into the market more rapidly if the siting takes advantage of the existing transmission infrastructure. Building long transmission lines can affect many landowners, often requiring a lengthy and extensive easement acquisition effort. The transmission line siting process must take into account the impact of those lines on environmentally sensitive and historically significant lands. Utility is not typically allowed to begin recovering costs until year 5 or 6.
81 !
The need to replace an aging distribution infrastructure to meet population and demand growth will require continued investment. It is becoming more evident that rising construction material costs are an increasingly important driver contributing to the higher actual and planned utility industry infrastructure investments. Nationwide, distribution investment is expected to be almost triple the size of projected transmission spending, according to the Edison Electric Institute. Distribution investment is likely to exceed generation and environmental capital spending, as well.
82 !
Non-ERCOT Transmission
Wholesale open access transmission rights subject to Federal Energy Regulatory Commission (FERC) jurisdiction. FERC transmission pricing reflects location of generation. FERC requires generators to bear higher cost relative to the ERCOT system of connecting with the transmission grid. Certification in Texas is with the PUC. Recently adopted PUC rules allows most non-ERCOT utilities to recover transmission investments between rate cases through a transmission cost recovery factor (TCRF).
83 !
The Texas Legislature mandated steady increases in renewable power in TX76RSB 7 (1999) and TX791RSB 20 (2005).
Starting Line: 880 MW in 1999 Old Goal 1: 2,880 MW by 2009 (Achieved by 2007) New Goal 1: 5,880 MW by 2015 New Target 1: 10,000 MW by 2025 New Target 2: 500 MW non-wind renewable generation
PUC adopted Substantive Rule 25.174 in December 2006, which creates framework for determining CREZs. Texas currently has 10,939 MW of installed renewable generation capacity (Q3 2012).
84 !
85 !
Energy Efciency !
86
Texas continues to be an energy leader through policies designed to improve the states energy efciency programs and bring improved technologies to the electric market.!
Utility-run programs have reduced customer consumption, thereby reducing the need for the construction of new generation.! Advanced metering provides information and opportunities that enable customers to take better control of their energy consumption and bills.! Houston and Dallas-Fort Worth ranked 1 and 2 nationally in number of homes that qualied for EPAs Energy Star designation.!
The Texas Electric Choice Act requires electric utilities to provide energy efciency programs and incentives, including efciency programs for low-income customers.!
TX80RHB 3693 raised the energy efciency goal for electric utilities from 10% of annual demand growth to 15% in 2008 and 20% in 2009.! The recent PUC recently passed a rule requiring utilities to offset 30 percent of their projected growth in demand by 2013.!
ERCOT competitive retailers are developing innovative plans and products that will help customers use less energy (e.g., customer education programs, energy audits, Internetcontrollable thermostats, etc.)!
87 !
In 2011, utilities in Texas exceeded their statewide legislative energy efficiency goals for the ninth straight year. Utilities achieved 529GWh of energy reduction and 270 MW of peak demand reduction. These energy savings correspond to an equivalent reduction of approximately 615 million pounds of carbon dioxide emissions per year.
88 !
Source: Frontier Associates LLC, Energy Efficiency Accomplishments of Texas Investor Owned Utilities, Calendar Year 2011
TX80RHB 3693 included a host of programs designed! to help reduce electricity usage in Texas. ! Raises energy efciency goal for electric utilities from 10% of annual demand growth to 15% in 2008 and 20% in 2009.! PUC will study energy efciency programs by January 15, 2009, and submit a report to the legislature. !
The study shall address whether utility energy efciency programs should continue and whether energy efciency programs are best provided by the competitive market.! The ndings of the study will determine whether a goal increase to 30 percent is achievable by 2010 and 50 percent by 2015.!
PUC will work with ERCOT to develop a method to account for projected energy efciency impacts in ERCOTs forecasts of future capacity, demand, and reserves. !
89 !
90 !
Advanced meters and other new technologies and associated infrastructure will provide information and opportunities that will enable customers to better understand the impact of controlling their energy consumption. By controlling their energy consumption, customers can better manage their bills and lessen their environmental impact. Advanced meters will allow for more automation of utility functions such as meter reading and connections/disconnections, which help to reduce costs.
91 !
The Smart Grid Transforms the Way We Buy, Deliver and Use Electricity
Benefits
Automated meter reading Improved system reliability and greater ease/timeliness of power restoration Improved line fault detection and diagnostics Real time grid feedback allows for more effective loading of utility assets Enables increased monitoring and diagnostics to enhance the life of utility assets Electric reliability improvements Friendly access to detailed consumption information to make informed choices and enable faster transactions Enables and promotes energy conservation Efficient switching and connections/disconnections Expands retailers ability to offer new products Establishes platform to offer future home appliance monitoring and control Allows retailers to offer pre-payment programs Efficient switching and connections/disconnections Enables demand-side management Facilitates integration of solar and wind generation into grid Promotes energy efficiency through immediate energy consumption awareness Facilitates reduced electric consumption which leads to reduced power plant emissions
Consumers
Retailers
Environment
92
The approved deployment plan for CenterPoint Energy called for installation of advanced meters over five years beginning in March 2009. In 2009, CenterPoint Energy received a Federal Smart Grid Investment Grant that enabled the deployment to be completed in 2012. CenterPoint completed installation of approximately 2.2 million meters throughout its service territory in mid-2012. Oncors approved deployment plan initiated in late 2008 will have installation of advanced meters completed by the end of 2012. As of August 31, 2012, Oncor has installed over 3 million meters. The AEP Texas deployment plan was approved in December 2009 and installation of advanced meters will be completed by the end of 2013. Over 600,000 meters have been installed as of August 31, 2012. TNMP began installation of advanced meters in September 2011. As of August 31, 2012, over 57 thousand have been installed.
93 !
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The ERCOT Competitive Retail Electric Market is Providing Strong Customer Benets! Key Takeaways
Price offers are substantially lower than prices available just before competition began, especially when adjusted for inflation. Retail electric prices have fallen even as other energy commodity prices such as gasoline, crude oil, natural gas and coal have risen. Texas national electric price ranking has improved since the market opened in 2001. Every competitive area in ERCOT has variable and 1-year lock offers available that are far lower than the national average price and nearly all state averages. Among states like Texas that depend heavily on natural gas for power generation, Texas prices compare favorably, with even lower prices available to those in the competitive market. The ERCOT market provides efficient market prices that track natural gas prices. Since 2007, Texas prices have fallen while other states prices have risen.
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Service Area
Dec. 2001 prices, not adjusted for inflation 9.6/kWh 10.0/kWh 10.4/kWh 9.7/kWh 10.6/kWh
AEP Texas Central AEP Texas North CenterPoint Energy Oncor TNMP
Sources: PUC Historical Data, Bureau of Labor and Statistics, www.powertochoose.org offers as of January 2, 2013
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18 16
/kWh
14 12 10 8 6 4 2 0
KY
VA
PA
MT
AK
WI
WY
MO
WA
WV
OK
AZ
GA
MS
MA
VT
MI
IA
ME
KS
TX
IL
CO
FL
LA
NM
NJ
DE
CA
RI
NE
NV
SC
AR
MN
OR
MD
DC
NC
OH
ND
CT
/kWh
Source: EIA average annual residential rates for 2001 and October 2012 monthly data (latest available information). Average lowest available price from powertochoose.org Web site as of October 1, 2012 for a residential customer using an average of 1,000 kWh per month.
LA WA ID AR ND UT KY MO OK OR WV MS WY TN NE MT SD GA IN IA VA KS TX CO NC AZ NM MN FL AL SC IL OH NV DC PA MD WI RI MI MA CA DE ME NJ NH AK CT VT NY HI
NH
NY
UT
TN
SD
AL
ID
IN
HI
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CENTS&PE&R&KWH&
10" 12" 14" 16" 18" 20" 0" 2" 4" 6" 8"
Every Competitive Area in ERCOT Has Variable and 1-Year Lock Offers Available that are Lower than the National Average Price
Na?onal&Average&
RESIDENTIAL&RETAIL&ELECTRICITY&PRICES" All&Data&from&October&2012&
LOWEST"DALLAS/FT"WORTH"PRICE" LOWEST"HOUSTON"PRICE" LOWEST"ABILENE"PRICE" LOWEST"LEWISVILLE"PRICE" LOWEST"CORPUS"CHRISTI"PRICE" LOWEST"ABILENE"PRICE";"1"YR"FIXED" LOWEST"DALLAS/FT"WORTH"PRICE";"1"YR" LOWEST"LEWISVILLE"PRICE";"1"YR"FIXED" Louisiana" Washington" Idaho" LOWEST"HOUSTON"PRICE";"1"YR"FIXED" LOWEST"CORPUS"CHRISTI"PRICE";"1"YR"FIXED" Arkansas" North"Dakota" Utah" Kentucky" Missouri" Oklahoma" Oregon" West"Virginia" Mississippi" Wyoming" Tennessee" Nebraska" Montana" South"Dakota" Georgia" Indiana" Iowa" Virginia" Kansas" Texas"(Statewide)" Colorado" North"Carolina" Arizona" New"Mexico" Minnesota" Florida" Alabama" South"Carolina" Illinois" Ohio" US"AVERAGE" Nevada" District"of"Columbia" Pennsylvania" Maryland" Wisconsin" Rhode"Island" Michigan" Massachuse[s" California" Delaware" Maine" New"Jersey" New"Hampshire" Alaska" Connec]cut" Vermont" New"York" Hawaii"
Sources: PowerToChoose.org offers as of October 1, 2012, U.S. Energy Information Administration, latest available data 98
Offers in Competitive Areas Compare Well With Prices in Other Areas of the State With Other Market Structures
Sources: Phone surveys conducted November 29, 2011; Power to Choose Web site, November 29, 2011; PUC Bill Comparisons (Data is October 2011)
/kWh
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Retail Electric Price Offers Have Fallen Even as Other Energy Commodity Prices Have Risen
320%
209%
101%
43%
Oil
Gasoline
PRB Coal
Natural Gas
Inflation
Sources: Public Utility Commission of Texas, U.S. Energy Information Association, NYMEX Commodity Exchange, Bureau of Labor Statistics, Power to Choose Notes: Commodity prices latest available as of November 13, 2012. Inflation covers period from 2001 to 2012
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U.S. Average
Renewable (Mostly Hydro) Nuclear Petroleum
1%
8%
Nuclear
9% 38% 20%
Natural Gas
Natural Gas
21%
13%
40%
Coal Wind Other
48%
Coal Renewable (Mostly Hydro) Oil
Capacity (MW)
Nuclear
11% 6% 22%
2%
6% 14% 39%
Natural Gas
Coal
Nuclear
10% 31%
59%
Natural Gas Coal
Note: Oil-fired generation is negligible in ERCOT, accounting for less than 0.1% of ERCOT capacity and load; numbers may not add up to 100% due to rounding. Sources: ERCOT (2010 data)
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% MWh from Natural Gas % MWh from Coal % MWh from Nuclear % MWh from Hydro % MWh from Other
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Texas Market Compares Favorably to Other States Utilizing Natural Gas as the Primary Generation Source!
Average Residential Electric Price Among Natural GasIntensive States
October 2012 (Latest Available Consistent Data) 20.00 18.00 16.00 14.00 12.00
Average Lowest Available 12Month Fixed Price Offer in ERCOT Competitive Market (October 2012): 8.7/kWh
/kWh
Sources: Energy Information Administration (data as of October 2012); EIA natural gas-intensive states; powertochoose.org as of October 1, 2012 Note: Texas statewide average price includes prices from both competitive and regulated areas of the state. 103
32
28
4/21
5/11
11/19
3/30
6/15
9/23
12/8
2/23
7/27
3/15
8/16
1/17
3/21
1/1
6/1
11/1
8/22
1/23
6/25
10/12
2007
1
2008
2009
12/28
2010
2011
2012
Average electric offers across the 5 TDSPs for residential customers using an average of 1,000 kWh per month. Excludes any 0.0/kWh introductory offers. 104 Sources: NYMEX; www.powertochoose.org
9/10
11/7
9/4
2/4
7/7
6/6
4/9
Since January 2007, Texas Prices Have Fallen While Others Have Risen
65
45
25
5
TX Competitive MA CT TX Statewide LA ME RI Natural Gas States (-TX) CA NV FL NH DE IL NY MS AR Restructured States (-TX) DC US (-TX) VT NC PA WA WI NJ SC IN MT OK TN IA KY AK OR AL MD CO MN OH UT VA AZ SD WY NM GA MI WV ND KS ID MO HI NE
-15
-35
Source: EIA average annual residential rates for January 2007 and July 2012 (latest available data), powertochoose.org for January 2, 2007 and July 15, 2012
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Several retail electric providers across the state also provide additional, voluntary programs to assist low-income customers.
In 2011, nearly $800,000 in bill payment assistance was committed to Reliant's CARE program. Nonprofit social service agencies review customer cases and qualify customers CARE funds based upon the agency's designated hardship criteria. In addition, more than a dozen Beat the Heat Centers were offered by Reliant in Corpus Christi, Dallas and Houston to provide heat relief in high-need areas. Below is information on several programs offered by TXU Energy. TXU Energy operates TXU Energy Aid, the largest bill-payment assistance program among electricity companies in the nation. The company committed $25 million over 5 years (through 2012) to this program which has helped over 390,000 Texas families since 1983. TXU Energy also works collaboratively with ~1,000 agencies across the state to assist customers in need. In addition, TXU Energy uniquely provides a self-funded, year-round low-income customer discount of ~10 percent. The company committed $125 million over 5 years (through 2012) for this program which assisted over 150,000 customers this summer. Since 2008, the company has also helped 18,000 low income households reduce their energy consumption through grants invested in energy efficiency improvements. Since September 2006, several REPs have participated in the low-income credit program resulting from CenterPoint Energys 2006 rate case settlement. This program is currently providing a credit of $7.68 per month to eligible customers.
Texans can check their electric providers Web site or call their provider to see what other programs are available.
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