Information on the electric industry in Texas.

1.
Electricity
101:
The
Electric
Industry
in
Texas
July
2015
Legisla;ve
adver;sing
paid
for
by:
John
W.
Fainter,
Jr.
•
President
and
CEO
Associa;on
of
Electric
Companies
of
Texas,
Inc.
1005
Congress,
Suite
600
•
Aus;n,
TX
78701
•
phone
512-­‐474-­‐6725
•
fax
512-­‐474-­‐9670
•
www.aect.net

2. 2
AECT
Principles
•
AECT
is
an
advocacy
group
composed
of
member
companies
commiTed
to:
-­‐
Ensuring
a
modern,
reliable
infrastructure
for
the
supply
&
delivery
of
electricity.
-­‐
Suppor;ng
efficient
compe;;ve
markets
that
are
fair
to
customers
and
market
par;cipants.
-­‐
Suppor;ng
consistent
and
predictable
oversight
and
regula;on
that
will
promote
investment
and
ensure
the
stability
of
Texas’
electric
industry.
-­‐
Promo;ng
an
economically
strong
and
environmentally
healthy
future
for
Texas,
including
conserva;on
and
efficient
use
of
available
resources.
•
AECT
member
companies
remain
dedicated
to
providing
Texas
customers
with
reliable
service
and
are
commiTed
to
the
highest
standards
of
integrity.
The
Associa+on
of
Electric
Companies
of
Texas,
Inc.
(AECT)
is
a
trade
organiza+on
of
investor-­‐owned
electric
companies
in
Texas.
Organized
in
1978,
AECT
provides
a
forum
for
member
company
representa+ves
to
exchange
informa+on
about
public
policy,
and
to
communicate
with
government
officials
and
the
public.
For
more
informa+on,
visit
www.aect.net.

3. 3
AECT
Companies
Within
ERCOT
Transmission
and
Distribu;on
U;li;es
Retail
Electric
Providers
Genera;on
Companies
Total
ERCOT
Capacity:
>74,000
MW

4. 4
AECT
Companies
Outside
of
ERCOT
Western
Electricity
Coordina;ng
Council
(WECC)
Southwest
Power
Pool
(SPP)
Midcon;nent
Independent
System
Operator
(MISO)
Total
ERCOT
Capacity:
>74,000
MW

5. 5
Slide
6:
Electric
Market
Structures
in
Texas
Slide
11:
Texas’
Wholesale
Electric
Market
Slide
22:
Emissions
and
the
Environment
Slide
30:
Water
Use
by
Electric
Generators
Slide
40:
Transmission
and
Distribu;on
U;li;es
Slide
49:
Energy
Efficiency
Slide
55:
Compe;;ve
Retail
Electric
Market
in
ERCOT
APPENDICES
Slide
64:
Appendix
A:
History
of
Electric
Regula;on
in
ERCOT
Slide
73:
Appendix
B:
AECT
Member
Companies
Contents

6. 6
Electric
Market
Structures
in
Texas

7. 7
ERCOT:
Separate
companies
provide
retail,
transmission
&
distribu;on
and
genera;on
services
•
In
compe;;ve
markets,
consumers
have
mul;ple
retail
electric
providers
(REPs)
and
service
plans
to
choose
from.
•
Wholesale
and
retail
prices
are
set
by
compe;;ve
market
forces,
while
the
PUC
sets
transmission
and
distribu;on
rates.
Power
Flow
Financial
Flow
Regulated

8. 8
ERCOT:
Separate
companies
provide
retail,
transmission
&
distribu;on
and
genera;on
services
•
Because
wholesale
electric
prices
are
set
by
the
compe;;ve
market,
the
risks
associated
with
the
cost
of
construc;on,
opera;ons
and
maintenance
of
a
genera;on
plant
are
borne
en;rely
by
the
generator
and
its
investors,
not
by
end-­‐
use
customers.
Power
Flow
Financial
Flow
Regulated

9. 9
Outside
ERCOT:
A
single
company
provides
retail,
transmission
&
distribu;on
and
genera;on
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
mul;-­‐state
electric
grids,
with
differing
regula;ons.
In
many
cases,
ver;cally
integrated
u;li;es
purchase
wholesale
power
from
certain
unregulated
en;;es.
Power
Flow
Financial
Flow
Regulated

10. 10
•
New
power
plants
in
these
regions
can
be
built
by
both
regulated
en;;es
and
certain
unregulated
en;;es
or
qualifying
facili;es.
•
Regulated
u;lity
power
plants,
however,
must
be
approved
by
the
PUC
afer
a
rigorous
review
of
need
and
si;ng.
Outside
ERCOT:
A
single
company
provides
retail,
transmission
&
distribu;on
and
genera;on
services
in
each
area
Power
Flow
Financial
Flow
Regulated

11. 11
Texas’
Wholesale
Electric
Market

12. 12
The
Compe;;ve
Wholesale
Market:
A
Success
Story
CompeLLon
has
brought
greater
efficiency
to
the
wholesale
market
– Generators
shoulder
the
risk
of
building
new
power
plants,
bringing
efficient,
cost-­‐
effec;ve
genera;on
to
consumers.
– New
power
plants
produce
more
electricity
per
unit
of
fuel.
– New
power
plants
include
modern
environmental
emissions
controls.
The
compeLLve
market
is
in
the
public
interest
– Opera;onal
efficiency
of
a
compe;;ve
market
helps
push
wholesale
prices
downward.
– No
market
structure
is
more
effec;ve
at
ensuring
efficient
opera;ons
than
a
compe;;ve
one.
Policy
decisions
should
be
focused
on
maintaining
vibrant
compeLLon
– Texas
leaders
should
support
policies
that
maintain
the
compe;;ve
market.
– The
compe;;ve
market
will
bring
forward
the
right
mix
of
technology
and
fuel
type
based
on
environmental
choices
by
policymakers.

13. 13
PermiTed
and
Opera;ng
Electric
Genera;ng
Units
in
Texas

14. 14
ERCOT
Genera;on
Mix
Compared
to
U.S.
Average
Note:
Oil-­‐fired
genera+on
is
negligible
in
ERCOT,
accoun+ng
for
less
than
0.1%
of
ERCOT
capacity
and
load;
numbers
may
not
add
up
to
100%
due
to
rounding.
Sources:
ERCOT
(2014
data
for
energy;
2015
data
for
capacity);
EIA
(2013
data
for
energy,
2012
data
for
capacity)
Capacity
(MW)
Energy
(MWh)
ERCOT
U.S.
Average
Nuclear
Natural
Gas
Coal
Non-­‐Hydro
Renewables
(Mostly
Wind)
Hydro
27%
39%
19%
7%
1%
Coal
Nuclear
Natural
Gas
Other
41%
36%
12%
1%
Coal
Natural
Gas
Nuclear
Wind
55%
24%
6%
14%
1%
Other
Wind
11%
Other
(Mostly
Petroleum)
6%
Nuclear
Natural
Gas
Coal
Non-­‐Hydro
Renewables
(Mostly
Wind)
42%
29%
9%
7%
5%
Other
(Mostly
Petroleum)
7%
Hydro

15. 15
Gas
on
the
Margin
in
ERCOT
Nearly
Year-­‐Round
• Because
of
their
lower
marginal
costs,
nuclear
and
coal-­‐fired
power
plants
in
ERCOT
operate
approximately
90
percent
of
the
;me
• Some
natural
gas-­‐fired
genera;on
operates
at
nearly
all
;mes
to
meet
demand
• Peaking
natural
gas-­‐fired
power
plants
are
ramped
on
and
off,
depending
upon
demand
• Wind-­‐generated
electricity
is
only
intermiTently
available,
depending
on
wind
condi;ons.
Typical
August
GeneraLon
Output
Source:
ERCOT

16. 16
Texas
Has
the
Most
Installed
Wind
Energy
Capacity
Source:
American
Wind
Energy
Associa+on,
Through
Q2
2015
15635
6018
5708
3932
3667
3153 3075 3035 2967
2593
0
2000
4000
6000
8000
10000
12000
14000
16000
TX CA IA OK IL OR WA MN KS CO
States With Most Installed Wind Capacity (MW)
23%
of
the
naLon’s
installed
wind
generaLon
capacity
is
located
in
Texas.

17. 17
ERCOT
Wholesale
Market
Management
• System
Reliability
– ERCOT
oversees
system
reliability.
– ERCOT
is
part
of
naLonal
reliability
council.
– ERCOT
protocols,
approved
by
PUC,
mandate
system
reliability
standards
that
all
market
parLcipants
must
follow.
• Statute
and
Rules
Address
“Market
Power”
and
GeneraLon
Merger
Issues
– Independent
Market
Monitor
oversees
wholesale
market
operaLons.
– GeneraLng
capacity
owned
and
controlled
by
a
Power
GeneraLon
Company
limited
to
20%
of
installed
generaLng
capacity
capable
of
delivering
power
to
a
power
region.
– AdministraLve
penalLes
for
market
power
abuse
were
reviewed
and
updated
during
the
79th
Regular
Session.
– Mergers
of
Power
GeneraLon
Companies
subject
to
PUC
review.
• Market
Design
– ERCOT
transiLoned
to
a
Nodal
Market
in
2009
as
a
result
of
PUC
rulemaking.
– The
change
is
expected
to
bring
cost-­‐savings
and
addiLonal
efficiency
to
the
market
by
enhancing
market
transparency
and
allocaLng
costs
more
accurately
to
market
parLcipants.

18. 18
Wholesale
Market
Management
Outside
ERCOT
• System
Reliability
– Larger,
mulL-­‐state
Councils
(MISO,
SPP,
WECC)
oversee
system
reliability.
– Each
is
part
of
naLonal
reliability
council.
– Protocols,
approved
by
the
Federal
Energy
Regulatory
Commission
(FERC),
mandate
system
reliability
standards
that
all
market
parLcipants
must
follow.
• Wholesale
market
operaLons
overseen
by
FERC

19. 19
1980 1990 2000 2010 2020 2030 2040
Increased
Popula;on
Drives
Future
Electric
Consump;on
Sources:
U.S.
Census,
Texas
State
Data
Center
0.5
scenario
Texas’
Projected
PopulaLon
Growth
(millions)
1980-­‐2040
28.9
million
25.1
million
37.0
million
32.9
million
20.9
million
17.0
million
14.2
million
To
meet
increases
in
electric
load
created
by
Texas’
rapid
popula;on
and
economic
growth,
Texas
will
require
addi;onal
power,
transmission
and
distribu;on,
customer
demand
response
and
energy
efficiency.

20. 20
ERCOT
Reports
Sufficient
Power
Expected
For
Summer
2015
• ERCOT
released
its
Seasonal
Assessment
of
Resource
Adequacy
(SARA)
on
May
1.
• ERCOT
does
not
expect
periods
of
limited
capacity
on
the
grid.
• According
to
ERCOT’s
meteorologist,
most
of
the
state
should
not
expect
temperatures
hoTer
than
last
summer.
– Texas
should
expect
fewer
100-­‐degree
days
than
other
recent
summers
.

21. 21
Long-­‐Term
Outlook
for
ERCOT
Genera;on
Source:
ERCOT,
2015
Report
on
the
Capacity,
Demand
and
Reserves
in
the
ERCOT
Region,
May
2015
65000$
70000$
75000$
80000$
85000$
2016% 2017% 2018% 2019% 2020% 2021% 2022% 2023% 2024% 2025%
MW%
ERCOT%Summer%Resources%and%Firm%Load%Forecast:%2016C2025%
Resources%
Load%Forecast%
Reserve%
Margin%
17.0%%
18.5%%
21.4%%
18.7%%
17.1%%
16.1%%
10.4%%13.2%%
14.6%%
11.8%%

22. 22
Emissions
and
the
Environment

23. 23
Texas
is
Among
Na;onwide
Leaders
in
Low
Emissions
Rates
States
With
NOx,
SO2
and
CO2
Emissions
Rates
Below
the
NaLonal
Average
for
Electric
GeneraLon
Source:
EPA
Air
Markets
Program
Data
(2014)

24. 24
13
Northeast
States
Texas
Sources:
CO2,
NOx,
SO2:
EPA
Air
Markets
Program
Data
(2014);
Land
Area:
US
Census
Bureau,
2010
Land Area 247,175 mi2 261,232 mi2
Short Tons of CO2 412,349,942 258,189,583
Tons of SO2 724,547 343,405
Tons of NOx 333,916 121,487
Comparison
of
Electric
U;lity
Genera;on
Emissions:
Texas
vs.
the
Northeast

25. 25
Texas’
Electric
Genera;ng
Plants
Remain
Among
Cleanest
NOx
EmiTers
in
the
Na;on
Source:
EPA
Air
Markets
Program
Data
(2014)

26. 26
Area
2014
NOx
Emission
Rate
Averages
(lbs/
mmBtu)
Na;onal
0.148
Texas
0.088
0.334
NM
0.088
TX
0.177
OK
0.209
AR
0.120
LA
Texas
electric
generators
have
the
lowest
rate
of
NOx
emissions
in
the
region
Texas
is
Already
Leading
the
Way
in
Clean
Power
Plants
Regionally
Source:
EPA
Air
Markets
Program
Data
(2014)

27. 27
Texas’
Electric
Genera;ng
Plants
Below
Na;onal
Average
SO2
Emissions
Rates
Source:
EPA
Air
Markets
Program
Data
(2014)

28. 28
Texas’
Electric
Genera;ng
Plants
Also
Below
Average
CO2
Emissions
Rates
Source:
EPA
Air
Markets
Program
Data
(2014)

29. 29
Selected
Environmental
Programs
and
Fees
• The
electric
industry
is
among
the
most
heavily
regulated
in
the
na;on,
complying
with
hundreds
of
regula;ons
and
paying
millions
of
dollars
in
fees
annually.
Selected
Current
Environmental
Programs
-­‐
Compliance
with
Na;onal
Ambient
Air
Quality
Standards
-­‐
State
Implementa;on
Plan
-­‐
NOx
reduc;ons
for
electric
genera;ng
units
-­‐
Clean
Air
Interstate/Clean
Air
Mercury
Rules
-­‐
New
Source
Review
(NSR)
Preven;on
of
Significant
Deteriora;on
-­‐
Non-­‐aTainment
NSR,
including
offset
-­‐
State
Minor
NSR
-­‐
Title
V
and
Acid
rain
permits
-­‐
Compliance
Assurance
Monitoring
-­‐
Con;nuous
Emissions
Monitoring
Systems
-­‐
Toxic
Release
Inventory
-­‐
Monitoring
cooling
water
-­‐
Mass
Emission
Cap
and
Trade
Program
Selected
Current
Environmental
Fees
-­‐
Title
V
federal
opera;ng
permit
fees
-­‐
Air
inspec;on
fees
-­‐
Air
quality
permit
fees
-­‐
Air
quality
permit
renewal
fees
-­‐
Wastewater
inspec;on
fees
-­‐
Wastewater
permit
applica;on
fees
-­‐
Water
quality
fees
-­‐
Potable
water
fees
-­‐
Water
use
permit
applica;on
fees
-­‐
Hazardous
waste
genera;on
fees
-­‐
Non-­‐hazardous
waste
fees
-­‐
Low
level
radioac;ve
waste
fee
-­‐
Injec;on
well
fee

30. 30
Water
Use
by
Electric
Generators

31. 31
• AECT
member
companies
represent
the
largest
private
owners,
builders,
and
operators
of
private
reservoirs
in
Texas.
• Dependable
water
supplies
are
essen;al
to
the
reliable
genera;on
of
electricity.
– Water
supply
is
generally
obtained
in
the
form
of
water
contracts/rights,
prior
to
the
construc;on
of
an
electric
genera;on
sta;on.
– Water
contracts/rights
are
secured
at
a
level
to
ensure
a
reliable
water
source
during
future
drought
periods.
– It
is
important
to
note
that
most
of
this
water
is
not
consumed:
water
consumed
for
electric
genera;on
is
currently
4%
of
total
Texas
water
demand.
• The
reliable
genera;on
of
electricity
is
necessary
for
pumping
water
to
ci;es
and
farms,
and
for
water
treatment
and
sewage
treatment
–
among
other
necessi;es.
• Moreover,
a
reliable
Texas
electricity
industry
is
necessary
for
the
state
to
meet
the
needs
of
our
growing
popula;on
and
the
new
and
growing
businesses
that
fuel
our
state’s
economy.
Overview
of
Water
Use
by
Electric
Generators
in
Texas

32. 32
• The
graphic
above
is
a
simplified
example
of
a
power
plant’s
use
of
water
for
steam
genera;on.
• Most
power
plants
heat
water
in
a
closed
system
un;l
it
becomes
steam,
then
pressurize
that
steam
to
turn
a
genera;ng
turbine.
• The
steam
is
then
routed
to
a
condenser,
where
the
water
is
condensed
and
reused
in
the
steam
cycle.
How
Texas’
Steam
Power
Plants
Use
Water
Turbine
Generator
Transformer
Pump
CombusLon
Water
Steam
Cooling
Water
Condenser
Fuel
Controls
Stack
Electricity
Flow
of
Power
Flow
of
H2O
Flow
of
H2O

33. 33
• Many
electric
genera;ng
facili;es
in
Texas
obtain
TCEQ
permits
for
use
of
fresh
surface
water
or
surface
saltwater
as
well
as
groundwater
conserva;on
district
permits
for
well
water
withdrawals.
• Electric
genera;ng
facili;es
in
Texas
are
required
to
obtain
TCEQ
permits
for
their
wastewater
discharge.
– AECT
member
companies
have
an
outstanding
record
of
compliance
with
state
and
federal
water
quality
standards
and
requirements,
which
includes
rigorous
monitoring
of
the
wastewater
discharge
• In
addi;on
to
complying
with
state
and
federal
water
quality
regula;ons,
AECT
member
companies
are
commiTed
to
prac;cing
sound
water
conserva;on.
We:
– Reuse
water
whenever
possible
– Capture
storm
water
runoff
– Restore,
enhance
and
create
aqua;c
habitats
– Preserve
ecosystems
– Enhance
and
create
valuable
wetlands
• Many
reservoirs
created
by
electric
genera;ng
companies
are
used
for
recrea;onal
purposes,
including
camping,
boa;ng,
fishing
and
swimming.
Management
and
Use
of
Water
at
Texas’
Power
Plants

34. 34
Drought
Update
and
Available
Water
Resources
For
Power
Plants
• Most
electric
generators
require
the
use
of
water
for
system
cooling.
• The
vast
majority
of
this
water
is
returned
to
its
source
–
typically
a
reservoir
built
by
the
power
plant
owner.
• As
of
July
2015,
drought
condi;ons
have
subsided
in
Texas.
The
system
remained
reliable
during
recent
droughts.
Source:
United
States
Drought
Monitor
–
July
21,
2015

35. 35
Water
Usage
In
the
Average
Household
• About
3
percent
of
water
use
in
the
average
household
is
for
electric
produc;on.
Source:
Viability
and
Impacts
of
Implemen;ng
Various
Power
Plant
Cooling
Technologies
in
Texas,
prepared
for
EPRI
by
Texas
A&M
University,
July
2012

36. 36
• The
typical
American
household
consumes
300
gallons
of
water
each
day.
Producing
the
electricity
consumed
by
that
household
requires
only
about
9½
gallons.
• Only
about
3%
of
an
average
resident’s
total
daily
consump;on
of
electricity
is
needed
to
take
care
of
all
of
daily
water
needs.
– This
includes
pumping
the
raw
water
from
the
ground
or
lake,
pumping
it
to
a
treatment
plant
and
trea;ng
it,
delivering
the
treated
water
to
the
resident
and
trea;ng
the
resul;ng
wastewater.
• EPRI’s
Water
Conserva;on
&
Technology
Center
report
supports
once-­‐through
cooling
used
on
the
majority
of
fossil
fuel-­‐fired
power
plants
today,
finding
that
“Manda;ng
one
cooling
technology
may
result
in
job
losses
and
have
unintended
consequences,”
due
to
the
costs
and
poten;al
impact
on
the
broader
state
economy.
Key
Findings
On
Water
Use
in
Texas
Source:
Viability
and
Impacts
of
Implemen;ng
Various
Power
Plant
Cooling
Technologies
in
Texas,
prepared
for
EPRI
by
Texas
A&M
University,
July
2012

37. 37
• Generators
are
taking
many
ac;ons
to
help
ensure
water
supplies
allow
for
reliable
opera;on.
Examples
include:
– Implemen;ng
water
conserva;on
measures
– Reusing
water
whenever
possible
– Using
treated
municipal
sewage
effluent
for
cooling
– Upgrading
power
plant
processes
to
minimize
or
eliminate
use
of
water
for
non-­‐
cooling
purposes
– Capturing,
trea;ng
and
using
storm
runoff
from
the
plant
site
– Procuring
addi;onal
water
rights
– Building
pipelines
to
remote
water
sources
– Adding
pumping
capability
– Using
advanced
water
treatment
systems
to
treat
and
use
surface
water
that
naturally
contains
high
levels
of
minerals
or
dissolved
solids,
thus
avoiding
use
of
higher
quality
surface
water
Mi;ga;ng
Drought
Effects

38. 38
• Zebra
mussels
clog
cooling
water
intake
valves,
as
well
as
impac;ng
water
supply.
The
mussels
have
mul;plied
so
quickly
in
Lake
Texoma
that
the
North
Texas
Municipal
Water
District
is
no
longer
able
to
pump
water.
• Hydrilla,
a
non-­‐na;ve
invasive
aqua;c
plant,
is
found
in
over
100
bodies
of
water
in
Texas.
In
great
quan;;es,
it
can
affect
water
supplies
and
opera;ons
of
power
plants.
Addi;onal
Water
Challenges:
Invasive
Species

39. 39
• Water
consump;on
for
electric
genera;on
is
currently
4%
of
total
Texas
water
demand.
– The
Texas
Water
Development
Board
projects
this
to
grow
to
7.4%
by
2060.
It
is
noteworthy
that
this
increase
in
water
usage
is
sufficient
to
provide
electricity
for
a
popula;on
projected
to
grow
over
the
same
;me
frame
by
82%.
• AECT
member
companies
have
made
substan;al
investments
to
secure
water
contracts/
rights
and
groundwater
resources
and
build
and
maintain
reservoirs
in
advance
of
actual
use.
• All
of
these
water
contracts/rights
and
groundwater
resources
have
been
or
are
held
for
substan;al
periods
of
;me
for
future
genera;ng
units
and
also
during
drought
periods
for
exis;ng
power
plants.
• AECT
member
companies
are
working
hard
to
ensure
adequate
water
supply
for
reliable
electric
genera;on,
including
building
pipelines
to
remote
water
sources,
seeking
addi;onal
water
rights,
adding
pumping
capability,
and
use
of
effluent
for
cooling,
and
implemen;ng
water
conserva;on
measures.
Genera;on
and
Water
Usage:
Summary

40. 40
Transmission
and
Distribu;on
U;li;es

41. 41
• Transmission
and
DistribuLon
ULliLes:
– Provide
reliable
delivery
of
electricity
on
a
24-­‐7
basis.
– Invest
in
and
build
infrastructure
(e.g.,
transmission
lines,
Smart
Grid)
to
support
the
needs
of
Texas’
growing
economy.
– Manage
their
transmission
networks
under
the
direc;on
of
ERCOT;
coordina;ng
with
ERCOT
on
transmission
planning
ac;vi;es.
– Respond
to
outages
(e.g.,
storms,
natural
disasters)
that
affect
the
grid
and
restore
service
as
quickly
as
safely
possible.
– Provide
key
market
informa;on,
such
as
premise
informa;on
and
metering
services
to
facilitate
successful
opera;on
of
the
ERCOT
deregulated
market.
– Provide
regulated
transmission
and
distribu;on
services
to
facilitate
opera;ons
of
wholesale
and
retail
business
en;;es.
– Charge
regulated
delivery
rates
to
REPs
§ Rates
based
on
a
historical
cost
of
service
including
a
PUC-­‐established
return
on
capital
investment
§ Alloca;on
of
ERCOT-­‐wide
transmission
costs
§ Non-­‐bypassable
charges
include
the
cost
to
deliver
electricity,
System
Benefit
Fund,
recovery
of
true-­‐up
costs
and
nuclear
decommissioning
expenses
for
exis;ng
nuclear
facili;es
TDUs’
Role
in
the
Compe;;ve
ERCOT
Market

42. 42
• ERCOT
Transmission
– 1995
amendments
to
the
Public
U;li;es
Regulatory
Act
(PURA)
required
PUC
to
ensure
open
access
to
transmission
grid,
allowing
new
independent
generators
to
u;lize
transmission
network.
– TX76RSB
7
adopted
“postage
stamp”
transmission
pricing
structure
and
eliminated
impact
of
loca;on
on
transmission
rates.
– Transmission
Cost
of
Service
(TCOS)
ratemaking
structure
implemented
and
billed
to
distribu;on
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
cer;fica;on.
Transmission
&
Distribu;on
Market
Design:
ERCOT

43. 43
Con;nued
Transmission
and
Distribu;on
Investment
Needed
Throughout
Texas
• According
to
the
Texas
State
Data
Center,
5
million
new
residents
are
expected
in
Texas
by
2020.
• New
genera;on
must
be
delivered
effec;vely
and
efficiently
to
popula;on
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
popula;on
and
economic
development.
Source:
ERCOT,
“Report
on
Exis+ng
and
Poten+al
Electric
System
Constraints
and
Needs,”
January
2012
(most
recent
update)

44. 44
• While
certain
types
of
genera;on
can
be
constructed
quickly
-­‐-­‐
ofen
as
short
as
12-­‐18
months
-­‐-­‐
transmission
lines
typically
take
between
three
and
five
years.
Genera;on
can
be
brought
into
the
market
more
rapidly
if
the
si;ng
takes
advantage
of
the
exis;ng
transmission
infrastructure.
• Building
long
transmission
lines
can
affect
many
landowners,
ofen
requiring
a
lengthy
and
extensive
easement
acquisi;on
effort.
• The
transmission
line
si;ng
process
must
take
into
account
the
impact
of
those
lines
on
environmentally
sensi;ve
and
historically
significant
lands.
• U;lity
is
not
typically
allowed
to
begin
recovering
costs
un;l
year
5
or
6.
Challenges
of
Transmission
Line
Construc;on
Example
of
Transmission
ConstrucLon
Process
in
ERCOT

45. 45
Distribu;on
Investment
Also
Needed
• The
need
to
replace
an
aging
distribu;on
infrastructure
to
meet
popula;on
and
demand
growth
will
require
con;nued
investment.
• It
is
becoming
more
evident
that
rising
construc;on
material
costs
are
an
increasingly
important
driver
contribu;ng
to
the
higher
actual
and
planned
u;lity
industry
infrastructure
investments.
• Na;onwide,
distribu;on
investment
is
expected
to
be
almost
triple
the
size
of
projected
transmission
spending,
according
to
the
Edison
Electric
Ins;tute.
Distribu;on
investment
is
likely
to
exceed
genera;on
and
environmental
capital
spending,
as
well.

46. 46
• Non-­‐ERCOT
Transmission
– Wholesale
open
access
transmission
rights
subject
to
Federal
Energy
Regulatory
Commission
(FERC)
jurisdic;on.
– FERC
transmission
pricing
reflects
loca;on
of
genera;on.
– FERC
requires
generators
to
bear
higher
cost
rela;ve
to
the
ERCOT
system
of
connec;ng
with
the
transmission
grid.
– Cer;fica;on
in
Texas
is
with
the
PUC.
– PUC
rules
allows
most
non-­‐ERCOT
u;li;es
to
recover
transmission
investments
between
rate
cases
through
a
transmission
cost
recovery
factor
(TCRF).
– U;li;es
may
also
recover
certain
distribu;on
investments
between
rate
cases
through
a
distribu;on
cost
recovery
factor
(DCRF)
Transmission
&
Distribu;on
Market
Design:
Non-­‐ERCOT

47. 47
Compe;;ve
Renewable
Energy
Zones:
Legisla;ve
and
Regulatory
Steps
• The
Texas
Legislature
mandated
steady
increases
in
renewable
power
in
TX76RSB
7
(1999)
and
TX791RSB
20
(2005).
– Star;ng
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
genera;on
• TX791SB
20
(2005)
also
required
PUC
to:
– designate
Compe;;ve
Renewable
Energy
Zones
(CREZs)
in
areas
in
which
renewable
energy
resources
and
suitable
land
areas
are
sufficient
to
develop
genera;ng
capacity
from
renewable
technologies;
– develop
a
plan
to
construct
necessary
transmission
capacity
in
a
manner
that
is
most
beneficial
and
cost
effec;ve
to
customers;
and
– take
into
account
transmission
constraints,
the
need
for
genera;on
and
the
level
of
financial
commitment
by
generators
when
defining
CREZs.
• PUC
adopted
Substan;ve
Rule
25.174
in
December
2006,
which
creates
framework
for
determining
CREZs.

48. 48
Map
of
Compe;;ve
Renewable
Energy
Zones

49. 49
Energy
Efficiency

50. 50
Energy
Efficiency
in
Texas:
Overview
• Texas
con;nues
to
be
an
energy
leader
through
policies
designed
to
improve
the
state’s
energy
efficiency
programs
and
bring
improved
technologies
to
the
electric
market.
– U;lity-­‐run
programs
have
reduced
customer
consump;on,
thereby
reducing
the
need
for
the
construc;on
of
new
genera;on.
– Advanced
metering
provides
informa;on
and
opportuni;es
that
enable
customers
to
take
beTer
control
of
their
energy
consump;on
and
bills.
– Houston
and
Dallas-­‐Fort
Worth
ranked
1
and
2
na;onally
in
number
of
homes
that
qualified
for
EPA’s
“Energy
Star”
designa;on.
• The
Texas
Electric
Choice
Act
requires
electric
u;li;es
to
provide
energy
efficiency
programs
and
incen;ves,
including
efficiency
programs
for
low-­‐income
customers.
– TX80RHB
3693
raised
the
energy
efficiency
goal
for
electric
u;li;es
from
10%
of
annual
demand
growth
to
15%
in
2008
and
20%
in
2009.
– The
recent
PUC
recently
passed
a
rule
requiring
u;li;es
to
offset
30
percent
of
their
projected
growth
in
demand
by
2013.
• ERCOT
compe;;ve
retailers
are
developing
innova;ve
plans
and
products
that
will
help
customers
use
less
energy
(e.g.,
customer
educa;on
programs,
energy
audits,
Internet-­‐controllable
thermostats,
etc.)

51. 51
Energy
Efficiency
Programs
Have
Exceeded
Goals
• In
2013,
the
majority
of
u;li;es
in
Texas
exceeded
their
statewide
energy
efficiency
goals.
U;li;es
achieved
548
GWh
of
energy
savings
and
415
MW
of
peak
demand
reduc;on.
Demand
ReducLon
by
Investor-­‐Owned
ULliLes,
2003-­‐2013
Source:
Fron;er
Associates
LLC,
“Energy
Efficiency
Accomplishments
of
Texas
Investor
Owned
U;li;es,
Calendar
Year
2013,”
prepared
for
the
Electric
U;lity
Marke;ng
Managers
of
Texas
(EUMMOT)

52. 52
Benefits
of
Advanced
Metering
• Advanced
meters
and
other
new
technologies
and
associated
infrastructure
will
provide
informa;on
and
opportuni;es
that
will
enable
customers
to
beTer
understand
the
impact
of
controlling
their
energy
consump;on.
• By
controlling
their
energy
consump;on,
customers
can
beTer
manage
their
bills
and
lessen
their
environmental
impact.
• Advanced
meters
will
allow
for
more
automa;on
of
u;lity
func;ons
such
as
meter
reading
and
connec;ons/disconnec;ons,
which
help
to
reduce
costs.

53. 53
The
Smart
Grid
Transforms
the
Way
We
Buy,
Deliver
and
Use
Electricity
Key
Stakeholder
Consumers
Electric
ULlity
Retailers
• Automated
meter
reading
• Improved
system
reliability
and
greater
ease/;meliness
of
power
restora;on
• Improved
line
fault
detec;on
and
diagnos;cs
• Real
;me
grid
feedback
allows
for
more
effec;ve
loading
of
u;lity
assets
• Enables
increased
monitoring
and
diagnos;cs
to
enhance
the
life
of
u;lity
assets
• Electric
reliability
improvements
• Friendly
access
to
detailed
consump;on
informa;on
to
make
informed
choices
and
enable
faster
transac;ons
• Enables
and
promotes
energy
conserva;on
• Efficient
switching
and
connec;ons/disconnec;ons
• Expands
retailer’s
ability
to
offer
new
products
• Establishes
plaxorm
to
offer
future
home
appliance
monitoring
and
control
• Allows
retailers
to
offer
pre-­‐payment
programs
• Efficient
switching
and
connec;ons/disconnec;ons
Environment
• Enables
demand-­‐side
management
• Facilitates
integra;on
of
solar
and
wind
genera;on
into
grid
• Promotes
energy
efficiency
through
immediate
energy
consump;on
awareness
• Facilitates
reduced
electric
consump;on
which
leads
to
reduced
power
plant
emissions
Benefits

54. 54
Advanced
Meters
Have
been
Proven
to
be
Accurate,
Safe
and
Reliable
• Accurate:
Advanced
meters
are
rigorously
tested
and
must
be
independently
cer;fied
to
prove
their
measurements
are
accurate.
In
fact,
repeated
tests
confirm
that
advanced
meters
are
ofen
more
accurate
than
analog
meters.
• Beneficial:
Increased
reliability,
restora;on
afer
a
power
outage
and
remote
meter
reading
are
among
the
immediate
cost-­‐savings
for
advanced
meters.
• Secure:
Advanced
meters
are
a
technological
leap,
much
like
cell
phones
and
other
evolving
industries.
U;li;es
use
advanced
encryp;on
technology
to
safeguard
consumer
data.
• Safe:
Digital
meter
radio
frequency
(RF)
emissions
are
well
below
FCC
standards
and
are
minimal
compared
to
the
RF
emissions
of
many
commonly
used
household
devices.
The
extensive
scien;fic
literature
reflects
that
there
is
no
credible
evidence
of
nega;ve
health
impacts
from
the
low
level
of
RF
emissions
from
digital
meters.
• Private:
U;li;es
adhere
to
PUC
rules
and
strict
policies,
following
Texas
laws
that
regulate
the
use
of
personal
informa;on
for
business
func;ons
like
billing
and
customer
service.

55. 55
Compe;;ve
Retail
Electric
Market
in
ERCOT

56. 56
The
ERCOT
Compe;;ve
Retail
Electric
Market
is
Providing
Strong
Customer
Benefits
Key
Takeaways
– Price
offers
are
substan;ally
lower
than
prices
available
just
before
compe;;on
began,
especially
when
adjusted
for
infla;on
– Texas’
na;onal
electric
price
ranking
has
improved
since
the
market
opened
in
2001
– Every
compe;;ve
area
in
ERCOT
has
variable
and
1-­‐year
lock
offers
available
that
are
far
lower
than
the
na;onal
average
price
and
nearly
all
state
averages
– Among
states
like
Texas
that
depend
heavily
on
natural
gas
for
power
genera;on,
Texas
prices
compare
favorably,
with
even
lower
prices
available
to
those
in
the
compe;;ve
market
– The
ERCOT
market
provides
efficient
market
prices
that
track
natural
gas
prices

57. 57
Service Area
Average Fixed-
Price Offer
(12-month term)
Lowest Fixed-Price
Offer
(12-month term)
Lowest Price
Offer
Available
Dec. 2001 prices,
not adjusted for
inflation
Dec. 2001 prices,
adjusted for inflation
AEP Texas Central 10.1¢/kWh 5.7¢/kWh 5.6¢/kWh 9.6¢/kWh 12.9¢/kWh
AEP Texas North 10.2¢/kWh 5.9¢/kWh 5.9¢/kWh 10.0¢/kWh 13.5¢/kWh
CenterPoint
Energy
9.5¢/kWh 5.0¢/kWh 4.7¢/kWh 10.4¢/kWh 14.0¢/kWh
Oncor 8.9¢/kWh 5.1¢/kWh 4.5¢/kWh 9.7¢/kWh 13.1¢/kWh
TNMP 9.5¢/kWh 5.8¢/kWh 5.5¢/kWh 10.6¢/kWh 14.3¢/kWh
Lower
Prices
Available
Today
than
Before
Compe;;on
Began
Sources:
PUC
Historical
Data,
Bureau
of
Labor
Sta;s;cs
-­‐
Consumer
Price
Index
(34.7%
infla;on
since
December
2001),
www.powertochoose.org
offers
as
of
July
1,
2015
July
2015
December
2001

58. 58
Texas’
Na;onal
Price
Ranking
Has
Improved
Since
2001
0
2
4
6
8
10
12
14
16
18
20
22
WA
LA
WV
KY
AR
ND
TN
OR
NE
OK
UT
MT
WY
SD
NC
ID
IN
FL
VA
GA
MO
CO
TX
AL
MS
IA
NM
MN
AZ
SC
KS
OH
DC
IL
NV
MD
PA
MI
DE
WI
NJ
ME
CA
VT
NY
RI
NH
AK
MA
CT
HI
0
2
4
6
8
10
12
14
16
18
KY
WA
ID
WV
OR
TN
ND
NE
UT
WY
MT
IN
MO
AL
OK
MS
SD
CO
MN
KS
MD
SC
AR
GA
DC
VA
WI
LA
NC
MI
AZ
OH
IA
FL
DE
IL
NM
TX
NV
PA
NJ
CT
CA
AK
RI
MA
NH
VT
ME
NY
HI
Source:
EIA
average
annual
residen;al
rates
for
2001
and
May
2015
monthly
data
(latest
available
informa;on).
Average
lowest
available
price
from
powertochoose.org
Web
site
as
of
May
1,
2015
for
a
residen;al
customer
using
an
average
of
1,000
kWh
per
month.
¢/kWh
¢/kWh
2001
State
Ranking
(Pre-­‐CompeLLon)
May
2015
State
Ranking
(Latest
Available)
Average
lowest
12-­‐
month
fixed
price
offer
in
compeLLve
market
in
May
2015:
5.6¢/kWh

59. 59
Sources:
Dec
2001
electric
rates:
Public
U;lity
Commission
of
Texas;
May
2015
electric
rates:
Power
to
Choose;
Average
Residen;al
Electricity:
U.S.
Energy
Informa;on
Administra;on
(Dec
2001
and
May
2015;
All
other
data:
U.S.
Bureau
of
Labor
Sta;s;cs
Gallon
of
Gas
145%
Dozen
Eggs
112%
Ground
Beef
99%
Ground
Coffee
62%
Hourly
Legal
Services
57%
U.S.
Average
Residen;al
Electricity
56%
Loaf
of
White
Bread
46%
Houston-­‐Galveston
Rent
44%
Dallas-­‐Fort
Worth
Rent
30%
Gallon
of
Milk
17%
ERCOT
Average
Lowest
Fixed
Price
Offer
-­‐44%
ERCOT
Average
Lowest
Available
Offer
-­‐44%
Price
Change:
December
2001
to
May
2015
Electric
Price
Offers
Compared
With
Other
Retail
Products

60. 60
0"
2"
4"
6"
8"
10"
12"
14"
16"
18"
20"
LOWEST"DFW"PRICE"
LOWEST"DFW"PRICE"4"1"YR"FIXED"
LOWEST"LEWISVILLE"PRICE"
LOWEST"LEWISVILLE"PRICE"4"1"YR"FIXED"
LOWEST"HOUSTON"PRICE"
LOWEST"ABILENE"PRICE"
LOWEST"ABILENE"PRICE"4"1"YR"FIXED"
LOWEST"CORPUS"CHRISTI"PRICE"
LOWEST"CORPUS"CHRISTI"PRICE"4"1"YR"FIXED"
LOWEST"HOUSTON"PRICE"4"1"YR"FIXED"
Washington"
Louisiana"
West"Virginia"
Kentucky"
Arkansas"
North"Dakota"
Tennessee"
Oregon"
Nebraska"
Oklahoma"
Utah"
Montana"
Wyoming"
South"Dakota"
North"Carolina"
Idaho"
Indiana"
Florida"
Virginia"
Georgia"
Missouri"
Colorado"
Texas"(Statewide)"
Alabama"
Mississippi"
Iowa"
New"Mexico"
Minnesota"
Arizona"
South"Carolina"
Kansas"
Ohio"
US"AVERAGE"
District"of"Columbia"
Illinois"
Nevada"
Maryland"
Pennsylvania"
Michigan"
Delaware"
Wisconsin"
New"Jersey"
Maine"
California"
Vermont"
New"York"
Rhode"Island"
New"Hampshire"
Alaska"
Massachuse[s"
Conneccut"
Hawaii"
CENTS&PER&KWH&
RESIDENTIAL"RETAIL"ELECTRICITY"PRICES"
All&Data&from&May&2015&
Na;onal&Average&
Every
Compe;;ve
Area
in
ERCOT
Has
Variable
and
1-­‐Year
Lock
Offers
Available
that
are
Lower
than
the
Na;onal
Average
Price
Sources:
PowerToChoose.org
offers
as
of
May
1,
2015
U.S.
Energy
Informa+on
Administra+on,
latest
available
data

61. 61
Texas
Market
Compares
Favorably
to
Other
States
U;lizing
Natural
Gas
as
the
Primary
Genera;on
Source
Sources:
Energy
Informa+on
Administra+on
(data
as
of
May
2015);
EIA
natural
gas-­‐intensive
states;
powertochoose.org
as
of
May
1,
2015
Note:
Texas
statewide
average
price
includes
prices
from
both
compeLLve
and
regulated
areas
of
the
state.
0.00
5.00
10.00
15.00
20.00
25.00
MA AK RI NY CA ME NV MS TX FL LA
¢/kWh Average Residential Electric Price Among Natural Gas-
Intensive States
!May!2015!(Latest!Available!Consistent!Data)!
Average
Lowest
Available
12-­‐Month
Fixed
Price
Offer
in
ERCOT
Compe;;ve
Market
(May
2015):
5.6¢/kWh

62. 62
Prices
Rising
Na;onwide;
Compe;;ve
Offer
Prices
Falling
in
Texas
-20
0
20
40
60
80
100
TXCompetitive
TX
ME
FL
NaturalGasStates
LA
NY
CA
DE
MA
NV
CT
AR
NJ
WA
VT
NC
RestructuredStates
DC
NH
US(-TX)
CO
RI
PA
MT
AK
HI
IL
TN
IA
MS
AL
MD
OR
WI
VA
GA
MI
SC
OH
MN
NM
UT
KY
AZ
IN
SD
WY
OK
WV
ND
NE
KS
MO
ID
Residential Price Changes (%) - Jan 2007 - May 2015
ResidenLal
Price
Change
(%)
–
Jan
2007
to
May
2015
Texas
0%
Gas-­‐Dependent
States
(excl.
TX)
9%
US
Average
(excl.
TX)
32%
Lowest
CompeLLve
Offer
Prices
in
Texas
-­‐53%
Restructured
States
(excl.
TX)
31%
Sources:
Energy
Informa+on
Administra+on
(data
as
of
May
2015);
EIA
natural
gas-­‐
intensive
states
and
restructured
states;
powertochoose.org
as
of
May
1,
2015

63. 63
Protec;ons
in
the
Market
for
Retail
Customers
• Make
Spanish-­‐language
support
available
to
customers
• Place
customer
deposits
in
interest-­‐bearing
accounts
and
return
that
interest
to
customers
when
the
deposit
is
returned
• Follow
a
mandated
;meline
for
disconnec;on
of
customers
• Provide
no;ce
in
case
of
disconnec;on
• Inves;gate
any
customer
complaint
within
21
days
• Provide
a
Terms
of
Service
Statement
detailing
contract
terms,
cancella;on
penal;es,
deposit
requirements,
fees,
payment
arrangement
op;ons,
how
to
cancel
service,
and
other
obliga;ons
of
the
REP
• Allow
a
customer
to
cancel
a
service
agreement
within
three
federal
business
days
afer
receiving
the
terms
of
service
• Allow
a
customer
to
cancel
the
switch
upon
receiving
no;fica;on
that
the
switch
will
occur
• Register
with
the
PUC
and
meet
financial
requirements
set
by
the
Commission
• Communicate
clearly
with
consumers
regarding
no;ce
of
contract
expira;on
• Demonstrate
creditworthiness
to
purchase
power
to
serve
its
customers
• Demonstrate
the
technical
ability
to
supply
electricity
• Maintain
privacy
of
customer
informa;on
• Not
discriminate
among
customers
• Not
add
charges
to
a
customer’s
electric
bill
for
services
not
requested
by
the
customer
• Provide
a
“Your
Rights
as
a
Customer”
disclosure
• Provide
an
Electricity
Facts
Label
to
allow
for
an
“apples-­‐to-­‐apples”
comparison
among
REPs
• Make
deferred
payment
plans
available
for
those
expressing
an
inability
to
pay
• Provide
the
LITE-­‐UP
discount
for
low-­‐income
Texans
during
summer
months
Among
other
requirements,
REPs
serving
residen;al
customers
must:
Even
this
brief
sampling
of
regula;ons
highlights
that
customers
are
protected

64. 64
Appendix
A:
History
of
Electric
U;lity
Regula;on
In
ERCOT

65. 65
Pre-­‐1975
• Ci;es
regulated
electric
u;lity
service
and
rates.
• Generally,
a
declining
cost
industry
–
rate
applica;ons
most
ofen
filed
to
decrease
rates.
1975
• Infla;on,
construc;on
costs
and
fuel
costs
drive
electricity
rates
up.
• 64th
Texas
Legislature
enacts
Public
U;lity
Regulatory
Act
(PURA)
to
implement
state
regula;on
of
electric
u;lity
service
and
rates
(Ci;es
permiTed
to
retain
original
jurisdic;on).
– Service
area,
transmission
line
and
genera;ng
plant
cer;fica;on.
– Rate
regula;on
(based
on
cost
of
service
plus
reasonable
return
on
investment).
– Rates
based
on
historical
test
year
costs
and
original
costs
of
infrastructure,
less
deprecia;on.
– Service
quality
regula;on.
– Customer
protec;on.
History
of
Electric
U;lity
Regula;on
in
Texas

66. 66
1976-­‐1995
• 1978
U.S.
Fuel
Use
Act
required
u;li;es
to
discon;nue
use
of
natural
gas
and
encouraged
the
use
of
coal
and
nuclear
for
fuel.
• Infla;on,
vola;le
fuel
costs
and
the
need
to
add
new
genera;ng
capacity
con;nue
to
increase
electricity
rates.
• Rate
proceedings
at
PUC
become
increasingly
adversarial.
– Consumer
groups
concerned
about
frequency
and
amount
of
rate
increases.
– U;li;es
concerned
about
increasingly
large
PUC
cost
disallowances
that
are
at
odds
with
the
regulatory
compact
and
erode
rates
of
return.
• Large
customers
;re
of
subsidizing
other
ratepayers
seek
opportuni;es
to
by-­‐pass
regulated
rates
and
obtain
choice
of
suppliers.
– Cogenera;on/self-­‐genera;on.
– Advocate
wholesale
compe;;on
and
transmission
open
access.
– Advocate
“retail
wheeling”.
• Natural
gas
was
favored
again
when
the
1978
U.S.
Fuel
Use
Act
was
repealed
in
the
1990s.
History
of
Electric
U;lity
Regula;on
in
Texas

67. 67
Wholesale
compeLLon
legislaLon
passed
(SB
373)
May
1995
Jan.
2002
Retail
compeLLon
legislaLon
Passed
(SB
7)
June
1999
Sept.
1999
ERCOT
Electric
rates
frozen
Jan.
2005
July
2001
Texas
Choice
pilot
program
begins
Affiliate
REPs
allowed
to
offer
non-­‐
price-­‐to-­‐
beat
prices
Steps
to
Electric
Compe;;on
In
Texas
Retail
choice
begins
in
ERCOT
Jan.
2007
End
of
price-­‐to-­‐
beat

68. 68
Wholesale
and
Retail
Electric
Compe;;on
Were
Passed
With
Broad,
Bipar;san
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.
• Senate
Bill
7,
which
opened
the
compe;;ve
market,
passed
in
1999.
– The
Senate
and
the
Lieutenant
Governor
were
Republican,
but
the
House
was
s;ll
majority
Democrat.
The
House
sponsor
and
author
of
the
bill
and
the
House
Speaker
in
1999
were
both
Democrats.
– Senate
Bill
7
passed
the
House
with
a
vote
of
144
Ayes
and
4
Nays.
• It
was
a
bipar;san
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.

69. 69
• Senate
Bill
No.
373
enacted
in
May
1995
– Required
u;li;es
to
provide
non-­‐discriminatory
open
access
transmission
to
support
wholesale
compe;;on
in
ERCOT.
– Recognized
new,
unregulated
par;cipants
in
ERCOT
wholesale
market.
§ Exempt
wholesale
generators
§ Power
marketers
– Allowed
non-­‐u;lity
wholesale
market
par;cipants
to
offer
market-­‐based
prices
in
ERCOT.
– Deregulated
electric
coopera;ve
distribu;on
rates.
Note:
Non-­‐ERCOT
areas
are
subject
to
FERC
jurisdic+on
for
wholesale
services,
including
transmission
services.
Steps
to
Compe;;on:
Wholesale
Compe;;on

70. 70
• ERCOT
market
restructuring
legislaLon,
Senate
Bill
7,
passed
in
1999
– Ini;ated
compe;;on
in
ERCOT
retail
markets
beginning
January
2002.
– Municipally-­‐owned
u;li;es
and
electric
coopera;ves
allowed
to
“opt-­‐in”.
– Included
environmental
and
energy
efficiency
provisions.
• Required
reduc;on
of
nitrogen
oxide
(NOx)
emissions
from
older
power
plants
by
50%,
and
sulfur
dioxide
emission
from
coal-­‐fired
facili;es
by
25%.
• U;li;es
required
to
fund
energy
efficiency
programs
equal
to
at
least
10%
of
each
year’s
annual
growth
in
demand.
– 1999
-­‐
2001
–
Prepara;on
for
retail
compe;;on.
• Electricity
rates
frozen.
• ERCOT
develops
systems
required
to
support
compe;;on.
• PUC
promulgates
compe;;on
rules.
• PUC
determines
rate
unbundling
cases.
– July
2001
–
Retail
compe;;on
pilot
project
begins.
Steps
to
Compe;;on:
Retail
Compe;;on

71. 71
Steps
to
Compe;;on:
Transi;on
Period
• January
2002-­‐2006
TransiLon
Period
– “Affiliated”
generators
• Required
to
make
15%
of
their
power
available
to
non-­‐affiliated
retail
providers
• During
first
two
years,
limited
to
guaranteed
market
price
for
power
as
projected
by
PUC
• Given
incen;ves
to
install
environmental
clean-­‐up
equipment
– Transmission
and
Distribu;on
U;li;es
• Ini;al
rates
set
using
es;mated/generic
costs
• Recovery
of
stranded
and
other
transi;on
costs
authorized
but
delayed
un;l
2004
True-­‐up
proceeding
– Securi;za;on
bonds
lower
cost
to
customers
– “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
un;l
12-­‐31-­‐06
• No
price
compe;;on
allowed
in
former
service
area
un;l
2005

72. 72
• Incumbents
required
to
separate
business
acLviLes
into
the
following
units.
– Power
genera;on
company.
– Retail
electric
provider.
– Transmission
and
distribu;on
u;lity.
• GeneraLon
and
retail
businesses
are
not
regulated
uLliLes.
– Power
Genera;on
Companies
must
be
registered
with
PUC.
– Retail
Electric
Providers
must
be
cer;fied
by
PUC.
• Transmission
and
distribuLon
businesses
remain
regulated
uLliLes.
• Methods
for
separaLon
of
business
acLviLes.
– Crea;on
of
separate
non-­‐affiliated
companies.
– Crea;on
of
separate
affiliated
companies
owned
by
a
common
holding
company.
– Sale
of
assets
to
a
third
party.
• Each
ERCOT
uLlity
chose
different
models.
• Code
of
conduct
rules
enforce
separaLon
requirements.
Structural
Unbundling

73. 73
Appendix
B:
AECT
Member
Companies

74. 74
American
Electric
Power
Electric
U+lity
AEP
Texas
is
connected
to
and
serves
more
than
a
million
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.
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
ver;cally
integrated
company
opera;ng
as
a
member
of
the
Southwest
Power
Pool.
Service
Territory
Shown
in
Gold
Service
Territory
Shown
in
Dark
Red

75. 75
CenterPoint
Energy
Transmission
&
Distribu+on
U+lity
CenterPoint
Energy
maintains
the
wires,
poles
and
electric
infrastructure
serving
its
5,000-­‐square-­‐mile
electric
service
territory
in
the
Houston
metropolitan
area.
CenterPoint
Energy
ensures
the
reliable
delivery
of
power
to
2.2
million
metered
homes
and
businesses,
but
does
not
generate
power
or
sell
it
to
customers.

76. 76
Constella;on
and
StarTex
Power
Retail
Services
Constella;on’s
retail
companies
serve
more
than
two-­‐thirds
of
the
Fortune
100,
approximately
100,000
business
and
public-­‐sector
customers
and
approximately
1
million
residen;al
customers
across
the
na;on.
Constella;on’s
retail
brands
include
Constella;on
NewEnergy,
Division,
StarTex
Power
and
BGE
Constella;on
NewEnergy
–
Gas
HOME.
In
Texas,
Constella;on’s
retail
en;;es
serve
over
150,000
residen;al
and
business
customers.
Compe++ve
Areas
of
Texas

77. 77
El
Paso
Electric
Company
Ver+cally
Integrated
U+lity
El
Paso
Electric
is
a
ver;cally
integrated
u;lity
serving
approximately
396,000
customers
in
the
Rio
Grande
Valley
in
west
Texas
and
southern
New
Mexico.
El
Paso
Electric
is
an
opera;ng
member
of
the
Western
Electricity
Coordina;ng
Council.

78. 78
Entergy
Texas
Ver+cally
Integrated
U+lity
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
426,000
customers
in
26
coun;es.

79. 79
Exelon
Genera;on
Electric
Genera+on
Company
Corpora;on
is
the
na;on’s
leading
compe;;ve
energy
provider
and
is
one
of
the
largest
compe;;ve
U.S.
power
generators,
with
more
than
35,000
megawaTs
of
owned
capacity
comprising
one
of
the
na;on’s
cleanest
and
lowest-­‐cost
power
genera;on
fleets.
The
company
maintains
strong
posi;ons
in
the
Midwest
and
Mid-­‐Atlan;c
regions.
In
Texas,
it
owns
and
controls
about
4,400
MW
of
natural
gas-­‐fired
and
wind
genera;on,
with
plants
in
Dallas,
Fort
Worth,
Granbury,
LaPorte,
and
Wharton.

80. 80
GDF
SUEZ
Electric
Genera+on
Company
• North
American
headquarters
in
Houston,
TX
• GDF
SUEZ
employs
~2,300
people
across
opera;ons
in
Canada,
US
&
Mexico
• Over
4,000
MW
of
power
genera;on
in
Texas
in
Wise,
Ellis,
Hays,
Goliad
and
Wharton
coun;es.
13,000+
MW
na;onwide
• 4th
largest
retail
provider
to
C&I
customers
o Serving
approximately
C&I
60,000
accounts
in
12
markets
and
serving
over
50%
of
the
Fortune
100
o Retail
brands
are
ThinkEnergy
&
GDF
SUEZ
Energy
Resources

81. 81
Lone
Star
Transmission
Transmission
Company
Lone
Star
Transmission,
LLC,
is
a
rate-­‐
regulated
transmission
service
provider
in
Texas
that
owns
and
operates
approximately
330
miles
of
high-­‐voltage
transmission
lines
and
associated
equipment.
Lone
Star's
transmission
facili;es
stretch
from
Scurry
County,
northwest
of
Abilene,
to
Navarro
County,
just
south
of
Dallas.
Lone
Star’s
facili;es
were
added
as
part
of
the
Compe;;ve
Renewable
Energy
(CREZ)
program
in
Texas,
but
today
they
enhance
the
safe
and
reliable
transmission
of
electricity
from
all
genera;on
sources.

82. 82
Luminant
Electric
Genera+on
Company
Luminant
is
a
compe;;ve
power
genera;on
business,
including
mining,
wholesale
marke;ng
and
trading,
and
development
opera;ons.
Luminant
has
more
than
15,400
megawaTs
of
genera;on
in
Texas,
including
2,300
MW
fueled
by
nuclear
power
and
8,000
MW
fueled
by
coal.
The
company
is
also
a
large
purchaser
of
wind-­‐generated
electricity.

83. 83
NextEra
Electric
Genera+on
Company
NextEra
Energy
Resource
owns
an
extremely
diverse
porxolio
of
nearly
18,000
MW
of
genera;on
na;onwide,
including
wind,
solar,
hydro,
natural
gas,
and
nuclear
power.
In
Texas,
NextEra’s
footprint
includes
5,243
MW
of
genera;on,
including
two
combined-­‐cycle
natural
gas
plants
and
15
wind
facili;es.

84. 84
NRG
Energy
Electric
Genera+on
Company
NRG
is
the
na;on’s
largest
compe;;ve
power
generator
with
over
52,000
MW
of
fossil
fuel,
nuclear,
solar
and
wind
capacity
across
the
country.
Approximately
24%
of
NRG’s
total
genera;on
is
in
Texas,
making
NRG
Texas
the
second
largest
power
generator
in
the
State.
Our
diverse
porxolio
-­‐-­‐
52%
natural
gas,
9%
nuclear,
6%
wind
and
33%
coal
-­‐-­‐
is
located
in
13
coun;es
across
Texas.

85. 85
Oncor
Transmission
&
Distribu+on
U+lity
Oncor
is
a
regulated
electric
distribu;on
and
transmission
business
that
delivers
reliable
electricity
to
consumers.
Oncor
operates
the
largest
distribu;on
and
transmission
system
in
Texas,
providing
power
to
more
than
3
million
electric
delivery
points
over
more
than
115,000
miles
of
transmission
and
distribu;on
lines.

86. 86
Reliant,
Green
Mountain
and
Cirro
Energy
Retail
Services
Compe++ve
Areas
of
Texas
Based
in
Houston,
NRG
provides
comprehensive
solu;ons
to
meet
consumers’
needs
through
our
retail
electricity
brands,
residen;al
solar
offerings
and
innova;ve
consumer
products
and
services
to
1.9
million
customers
across
the
state.

87. 87
Texas-­‐New
Mexico
Power
Co.
Transmission
&
Distribu+on
U+lity
TNMP
provides
electric
service
to
236,000
customers
throughout
Texas.
TNMP
is
owned
by
PNM
Resources,
an
energy
holding
company
based
in
Albuquerque,
New
Mexico.

88. 88
TXU
Energy
Retail
Electric
Provider
TXU
Energy
is
a
market-­‐leading
retail
electric
provider,
powering
the
lives
of
more
Texans
than
any
other
retailer.
TXU
Energy
offers
a
variety
of
innova;ve
products
and
solu;ons,
allowing
its
residen;al
and
business
customers
to
choose
op;ons
that
best
meet
their
needs
including
excep;onal
customer
service,
compe;;vely
priced
electricity
service
plans,
innova;ve
energy
efficiency
op;ons,
renewable
energy
programs
and
other
electricity-­‐related
products
and
services.
Compe++ve
Areas
of
Texas

89. 89
Xcel
Energy
Ver+cally
Integrated
U+lity
Xcel
Energy
owns
Southwestern
Public
Service
Company,
a
regional
electric
u;lity
that
provides
service
to
about
383,000
persons
in
a
52,000
square-­‐mile
area
comprised
of
the
South
Plains
and
Panhandle
of
Texas,
and
eastern
New
Mexico.

90. 90
Web:
AECT.net
Twioer:
twioer.com/AECTnet
Facebook:
AECT
Advocacy
Email:
info@aect.net