Legislative Staff Briefing: Update on the Texas Electric Industry


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Includes information on electricity consumption this winter, energy efficiency programs and price data in the competitive electric market.

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Legislative Staff Briefing: Update on the Texas Electric Industry

  1. 1. Update on the Texas Electric Industry February 23, 2010 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
  2. 2. 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 investor- owned 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. 2
  3. 3. U.S. Divided into Eight Reliability Regions • The eight reliability regions in the FERC continental U.S. are subject to the oversight and enforcement authority of NERC the North American Electric Reliability Corporation (NERC), which is subject to the Federal Energy Regulatory Commission’s (FERC) oversight. NERC is responsible for developing standards to ensure and improve reliability for delivery of electricity on the bulk power system. • Electric systems in Texas are located within four separate reliability regions: - Texas Regional Entity (TRE), which oversees participants in the Electric Reliability Council of Texas (ERCOT); - SERC Reliability Corporation; - Southwest Power Pool (SPP); and - Western Electricity Coordinating Council (WECC). (ERCOT) 3
  4. 4. AECT Member Companies Within ERCOT Retail Electric Providers Transmission and Distribution Utilities Generation Companies 4
  5. 5. AECT Companies Outside of ERCOT SERC Reliability Corporation Southwest Power Pool (SPP) Western Electricity Coordinating Council (WECC) 5
  6. 6. 2009-2010 Winter Electric Usage Up 6
  7. 7. Background • Heating Degree Days (HDDs) are an indicator of how cold it is, and how much energy is required to heat one’s home • HDDs are calculated each day as follows: 65° – (Avg. Temp) • A higher number of HDDs indicates colder conditions • In Dec 09 and Jan 10, areas in Texas experienced more HDDs than normal – as a result, energy usage increased • Parts of Texas are in the midst of one of the coldest winters on record 7
  8. 8. Inclement Winter Weather Bringing Increased Energy Usage !"##$$%&'$()"%*&+$*,$$&+(-.&/,011234&56&+789: )!! 60% Increase (!! ';7<234&+;4=;;&+789&56&;3>;>&$7?@&+78&/A79;&BC: '!! &!! Normal +,-./ 2008/2009 #!!)*#!!0 %!! 2009/2010 #!!0*#!"! $!! #!! "!! ! ""*" ""*"' "#*" "#*"' "#*$" "*"& "*$! #*"% $*" $*"' $*$" %*"& %*$! • Using Killeen as an example, heating degree days are far higher than last year, making increased electric consumption and bringing higher bills. 8
  9. 9. Inclement Winter Weather Bringing Increased Energy Usage Texas power usage sets another winter record January 8, 2010 Electricity usage in Texas rose Friday as arctic air covered most of the state, hitting another winter power record after setting one just the night before, according to initial data from the state grid operator. The Electric Reliability Council of Texas (ERCOT) said power use as of 8 a.m. CST (9 a.m. EST) reached 55,856 megawatts, surpassing the winter peak set Thursday evening of 52,001 MW and the previous record of 50,408 MW in February 2007. ERCOT reported no major power problems. Temperatures across Texas are running about 15 to 20 degrees Fahrenheit below normal, according to DTN Meteorlogix. 9
  10. 10. Key Factors Affecting Electricity Consumption in Winter • Age of home • Size of home • Insulation • Efficiency of heating equipment • Thermostat setting • Seasonal lighting • Longer use of lighting • Increased use of electronics • Increased run times for pool equipment 10
  11. 11. Lowering Bills With Energy Efficiency Programs 11
  12. 12. Energy Efficiency Tips • Check insulation • Install a programmable thermostat • Check your air filter • Change light bulbs to compact fluorescents • Avoid lighting empty rooms • Caulk and weather-strip all doors and windows • Keep shades and curtains open during the day on the south side of your home • Make sure radiators and vents aren’t blocked • Make sure fireplace damper is closed when not in use 12
  13. 13. Energy Efficiency in Texas: Overview • Texas continues to be an energy leader through policies designed to improve the state’s energy efficiency 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 qualified for EPA’s “Energy Star” designation. • The Texas Electric Choice Act requires electric utilities to provide energy efficiency programs and incentives, including efficiency programs for low-income customers. • ERCOT competitive retailers are developing innovative plans and products designed to help customers use less energy (e.g., customer education programs, energy audits, programs to benefit from use of Internet-controllable thermostats, etc.) 13
  14. 14. Energy Efficiency Programs Have Exceeded Goals Total Energy Savings by Investor-Owned Utilities 2003 - 2008 • In 2008, utilities in Texas achieved 202 MW of peak demand reduction in 2008, which was 76% above their 115 MW goal. • Utility programs implemented for the years 1999 through 2008 have put measures in place that produced 1,125 MW of peak demand reduction and 3,014 GWh of energy savings. Source: Frontier Associates LLC, “Energy Efficiency Accomplishments of Texas Investor Owned Utilities, Calendar Year 2008” 14
  15. 15. Energy Efficiency Resources • Customers can contact their electric utility to find out what programs are available, or to find a contractor or vendor who participates in the state energy efficiency programs. • Customers can call 2-1-1, the Texas Health and Human Service Commission's information and referral network to learn about programs available in the area. • Additional resources: – Texas Department of Housing and Community Affairs: www.tdhca.state.tx.us/assist_repair.htm – U.S. Department of Energy: www.energy.gov/energyefficiency – Get Energy Active: www.getenergyactive.org 15
  16. 16. Benefits of Advanced Metering • 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. 16
  17. 17. The Smart Grid Transforms the Way We Buy, Deliver and Use Electricity Key Stakeholder Benefits • Automated meter reading Electric • Improved system reliability and greater ease/timeliness of power restoration • Improved line fault detection and diagnostics Utility • 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 Consumers and enable faster transactions • Enables and promotes energy conservation • Efficient switching and connections/disconnections • Expands retailer’s ability to offer new products • Establishes platform to offer future home appliance monitoring and control Retailers • 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 Environment • Promotes energy efficiency through immediate energy consumption awareness • Facilitates reduced electric consumption which leads to reduced power plant emissions 17
  18. 18. Advanced Metering Activities in Texas • The approved deployment plan for CenterPoint Energy calls for installation of advanced meters over five years beginning in March 2009. In 2009, CenterPoint Energy was named as a recipient of a Federal Smart Grid Investment Grant that should enable installation of all meters by late 2012. Through year-end 2009, CenterPoint Energy installed 152,275 advanced meters, and another 42,815 were installed in January 2010. • Oncor’s approved deployment plan initiated in late 2008 will have installation of advanced meters completed by the end of 2012. To date, Oncor has installed 709,435 meters. • The AEP Texas deployment plan was approved in December 2009 and installation of advanced meters will be completed by the end of 2013. To date, nearly 5,000 meters have been installed in Portland, Texas, in order to conduct a system acceptance test. Full-scale deployment will begin in the second quarter of 2010. • The cost for the meters and associated communications and computer equipment will be recovered through a monthly surcharge, which can be adjusted over time to reflect both the inclusion of AMS costs in future base rates and variances between the estimated versus the actual cost of implementing the deployment plan. The respective surcharges for both Oncor and CenterPoint Energy take into account the savings advanced meters are expected to bring each company. 18
  19. 19. Lowering Bills in the Competitive Retail Market 19
  20. 20. Better Prices Available Today Than One Year Ago February 23, 2009 February 22, 2010 Percent Change # of 1-Year Fixed-Price Products 30 50 67% more offers Average 1-Year Fixed- Price Offer 12.72¢/kWh 11.33¢/kWh 11% decrease Lowest 1-Year Fixed- Price Offer 11.6¢/kWh 10.4¢/kWh 10% decrease Lowest Offer Available in the Market 9.7¢/kWh 8.6¢/kWh 11% decrease Source: www.powertochoose.org; prices are a simple average among service territories. 20
  21. 21. Lower inflation-adjusted prices available today than before competition began Dec. 2001 Lowest Fixed-Price Lowest Dec. 2001 prices, not Service Area Offer Variable Price prices, adjusted adjusted for (>12-month term) Offer for inflation inflation AEP Texas Central 10.8¢/kWh 9.1¢/kWh 9.6¢/kWh 11.7¢/kWh AEP Texas North 9.9¢/kWh 8.8¢/kWh 10.0¢/kWh 12.2¢/kWh CenterPoint Energy 10.7¢/kWh 8.8¢/kWh 10.4¢/kWh 12.7¢/kWh Oncor 10.1¢/kWh 8.2¢/kWh 9.7¢/kWh 11.8¢/kWh TNMP 10.4¢/kWh 8.1¢/kWh 10.6¢/kWh 12.9¢/kWh Sources: PUC Historical Data, Bureau of Labor and Statistics, www.powertochoose.org offers as of February 22, 2010 21
  22. 22. Retail Electric Prices Have Grown Far Less Than Other Energy Commodities Percentage Change in Commodities December 2001 - February 2010 Sources: Public Utility Commission of Texas, U.S. Energy Information Association, NYMEX Commodity Exchange, Bureau of Labor Statistics. Notes: Commodity prices latest available as of February 22, 2010; coal percentage increase is approximate. Inflation covers period from 2001 to 2009 22
  23. 23. ERCOT Generation Mix In 2009 Source: Public Utility Commission of Texas (PUC) Chair Barry Smitherman Presentation to the Gulf Coast Power Association, Oct. 6, 2009 23
  24. 24. Texas Market Compares Favorably to Other States Utilizing Natural Gas as the Primary Generation Source Average Lowest Available Price in ERCOT Competitive Market In October 2009: 9.1¢/kWh February 2010: 8.6¢/kWh Sources: Energy Information Administration (data as of October 2009); EIA natural gas-intensive states; powertochoose.org as of 10/15/09 and 2/22/10 Note: Texas statewide average price includes prices from both competitive and regulated areas of the state. 24
  25. 25. AECT Online AECT.net @aectnet 25