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Update on the Texas Electric Industry: Preparing for Summer


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  • 1. Update  on  the  Texas  Electric  Industry:   Preparing  for  Summer     Legisla)ve  Staff  Briefing   May  15,  2014   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 •
  • 2. 2 AECT  Principles   •  AECT  is  an  advocacy  group  composed  of  member  companies  commiHed  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  commiHed  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  
  • 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)  
  • 5. 5   Preparing  for  Summer       Opportuni)es  for  Retail  Customers     Generators  Prepared  for  Heat     Hurricane  Season  Begins  in  June  
  • 6. 6 Texas  Summers  Are  Long  And  Hot   •  When  temperatures  rise,  electricity  consump)on  and   customer  bill  amounts  tend  to  increase   •  Even  if  thermostats  are  set  at  a  constant  temperature,   as  it  gets  hoHer  outside  the  A/C  must  work  harder  to   keep  up  and  therefore  uses  more  electricity   •  Strong  PUC  customer  protec)on  rules  are  in  place  to   help  customers  during  the  hot  Texas  summer   •  Con)nued  customer  educa)on,  empowerment,  and   choice  are  key   5/19   5/26   6/2   6/9   6/16   6/23   6/30   7/7   7/14   7/21   7/28   8/4   8/11   8/18   8/25   May   June   July   August   86       96-­‐9 9   87     96-­‐1 04   89     98-­‐1 03   91     100-­‐ 105   92     102-­‐ 105   93       102-­‐ 112   95       104-­‐ 108   95       105-­‐ 110   96     104-­‐ 110   97       104-­‐ 111   97     107-­‐ 111   97       107-­‐ 110   97       105-­‐ 108   96       104-­‐ 108   95       104-­‐ 108   North  Texas  Historical  Weather  Data   Average   high   Record   high  
  • 7. 7 May 2014 Lower  Prices  Available  Today  than  Before   Compe))on  Began   Sources: PUC Historical Data, Bureau of Labor Statistics - Consumer Price Index (34% inflation since December 2001), offers as of May 1, 2014 December 2001 While  ERCOT  compeOOve  offers  have  dropped  significantly,  the  latest  average  U.S.   residenOal  electricity  prices  are  up  43%  since  2001.   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 11.8¢/kWh 9.6¢/kWh 8.4¢/kWh 9.6¢/kWh 12.8¢/kWh AEP Texas North 11.6¢/kWh 9.4¢/kWh 7.9¢/kWh 10.0¢/kWh 13.3¢/kWh CenterPoint Energy 11.6¢/kWh 9.8¢/kWh 8.3¢/kWh 10.4¢/kWh 13.9¢/kWh Oncor 10.7¢/kWh 9.1¢/kWh 7.3¢/kWh 9.7¢/kWh 12.9¢/kWh TNMP 11.3¢/kWh 9.5¢/kWh 7.7¢/kWh 10.6¢/kWh 14.1¢/kWh
  • 8. 8 Retail  Electric  Providers  (REPs)  Launched   Solu)ons  Designed  To  Address  Common   Customer  Inquiries  During  The  Summer   Retail  electric  providers  deliver  summer  soluOons  to  customers  that  are  tailored  to  their   needs,  building  on  the  PUC’s  strong  customer  protecOon  rules   Customer  Inquiry  Category   Sample  SoluOons  Offered  by  REPs   Electricity  Usage     •  Energy  Efficiency  Tips   •  Energy  Management  Alerts  (e.g.,  Budget/Usage  Reports)   •  Online/Mobile  Account  Access   •  Time  of  Use  Plans   Bill  Amount  and  Components     •  Average  Price  per  kWh  Informa)on   •  Transmission  Distribu)on  U)lity  Charges  Informa)on   Bill  Payment  Assistance     •  System  Benefit  Fund  for  Low  Income  Customers   •  Average  Monthly  Billing   •  Deferrals   •  Installment  Plans   •  Texas  211   •  Agency  Assistance  
  • 9. 9 Energy  Efficiency  Tips   •  Raise  temperature  sebng  on  thermostat   •  Use  ceiling  fans  in  the  “down”  mode  to  help  keep  cool   •  Check  HVAC  air  filter   •  Check  insula)on   •  Change  light  bulbs  to  compact  fluorescents   •  Caulk  and  weather-­‐strip  all  doors  and  windows   •  Make  sure  fireplace  damper  is  closed  when  not  in  use   •  Keep  shades  and  curtains  closed  during  the  day  
  • 10. 10   Preparing  for  Summer       Opportuni)es  for  Retail  Customers     Generators  Prepared  for  Heat     Hurricane  Season  Begins  in  June  
  • 11. 11" ERCOT  Reports  Sufficient  Power   Expected  For  Summer  2014   •  ERCOT  released  its  Seasonal  Assessment     of  Resource  Adequacy  (SARA)  on  May  1.   •  ERCOT  found  that  ERCOT  does  not  expect  periods  of  limited  capacity.   –  However,  ERCOT  notes  in  the  SARA  that  “If  an  extreme  system  peak  occurs… [condi)ons]  could  result  in  an  Energy  Emergency  Alert  (EEA),  with   corresponding  public  appeals  for  conserva)on.  Depending  on  the  severity  of   the  situa)on  and  the  amount  of  genera)on  available  during  periods  of  highest   demand,  ERCOT  could  take  other  progressive  steps  necessary  to  protect   overall  system.”   •  According  to  ERCOT’s  meteorologist,  most  of  the  state  should  not  expect   temperatures  hoHer  than  last  summer.   –  While  not  as  hot  as  last  summer,  temperatures  are  likely  to  be  above  the  long-­‐ term  historical  average  in  Texas.   –  July  is  expected  to  be  hoHest,  especially  affec)ng  Aus)n,  San  Antonio  and  the   Valley.  
  • 12. 12" Longer-­‐Term  Outlook  for  ERCOT     Shows  Genera)on  Investment  S)ll  Needed   Source:  ERCOT,  2015  Report  on  the  Capacity,  Demand  and  Reserves  in  the  ERCOT  Region,  May  2014   65000$ 70000$ 75000$ 80000$ 85000$ 2015% 2016% 2017% 2018% 2019% 2020% 2021% 2022% 2023% 2024% MW% ERCOT%Summer%Resources%and%Firm%Load%Forecast:%2015C2024% Resources% Load%Forecast% Reserve% Margin%14.3%% 14.1%% 13.8%% 12.3%% 9.8%% 8.4%% 3.5%% 6.1%% 7.4%% 4.8%%
  • 13. 13" Opera)ng  Reserve  Demand  Curve   To  Enhance  Efficiency  in  Scarcity  Pricing   A  Cri)cal  Step  to  Any  Future  Market  Design     •  The  objec)ve  of  an  ORDC  (opera)ng  reserve  demand  curve)  is  to  improve  the  efficiency  and   accuracy  of  energy  and  reserves  pricing  as  opera)ng  reserves  (that  are  immediately  available  to   ERCOT  to  manage  the  grid  in  real-­‐)me)  are  depleted  and  the  risk  of  involuntary  load   curtailment  increases.   •  ORDC  accomplishes  its  objec)ve  by  administra)vely  adjus)ng  prices  for  energy  and  reserves  to   approximate  the  real  cost  of  customers  losing  power.  
  • 14. 14" 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.   •  Drought  condi)ons  remain  in  much  of  Texas,  but  the  electricity  system  has   remained  reliable.   Source: United States Drought Monitor – April 29, 2014
  • 15. 15" Water  Usage     In  the  Average  Household   •  To  put  water  use  for  electricity  into  perspec)ve,  only  about  3  percent  of   water  use  in  the  average  household  is  for  electric  produc)on.   Source: “Viability and Impacts of Implementing Various Power Plant Cooling Technologies in Texas,” Electric Power Research Institute, 2012
  • 16. 16" Electric  Generators  Prepared     for  Summer  Heat   •  Electric  generators  prepare  facili)es  for  opera)ons  during  the   summer  through  rou)ne  maintenance,  which  typically  occurs   during  March  and  April.   –  Maintenance  includes  assessment  of  physical  components  of  the  power  plant   to  ensure  con)nued  opera)on  whenever  possible.   –  Given  Texas’  hot  climate,  power  plants  are  designed  specifically  for  opera)on   during  the  summer.   •  Summer  readiness  programs  are  focused  on  safety,  evalua)on  of   problem  areas,  tes)ng,  training  and  communica)ons.     –  The  immediate  goal  is  reliable  opera)on  of  power  plants,  including  “peaker”   plants  used  during  )mes  of  peak  demand,  such  as  the  anernoon  of  a  hot   summer  day.   –  Procedures  are  also  in  place  to  ensure  the  grid  operator  –  such  as  ERCOT  –  is   no)fied  of  offline  power  plants,  to  allow  for  procurement  of  needed   genera)on.  
  • 17. 17   Preparing  for  Summer       Opportuni)es  for  Retail  Customers     Generators  Prepared  for  Heat     Hurricane  Season  Begins  in  June  
  • 18. 18" “Quiet”  Hurricane  Season     Predicted   •  Hurricane  season  runs  June  1   through  the  end  of  November.   •  Researchers  at  Colorado  State   University  predict  a  “quiet”   2014  hurricane  season,   although  the  official  forecast  for   the  season  from  the  Na)onal   Oceanic  and  Atmospheric   Administra)on  (NOAA)  will  not   be  available  un)l  closer  to  June.   •  El  Niño  condi)ons  over  the   Pacific  Ocean  and  cooler  water   temperatures  in  the  Atlan)c   Ocean  are  two  factors  that  are   expected  to  result  in  fewer   storms  than  normal.     2013  Tropical  Storm  AcOvity   •  Electric  service  providers  monitor  weather  threats  around  the  clock  and  remain  in  a   state  of  readiness.  
  • 19. 19" U)li)es  Prepared  for     Storm  Response   •  Each  u)lity  maintains  emergency  preparedness  plans  to  mi)gate  impacts  from  the   most  common  inclement  weather,  while  maintaining  crisis  response  teams  to   quickly  respond  to  these  emergencies  and,  if  necessary,  emergencies  in  other  parts   of  the  state  or  country.     •  U)li)es  perform  reviews  aner  actual  ac)va)ons  of  their  emergency  plans  and   make  revisions  based  on  lessons  learned  in  order  to  beHer  prepare  for  future   emergency  events.   •  In  addi)on  to  linemen  and  local  contractors,  an  emergency  plan  typically  includes   virtually  every  company  employee  -­‐  even  those  who  do  not  tradi)onally  work  in   the  field.     •  Through  electric  u)lity  mutual  assistance  programs,  most  u)li)es  have  access  to   thousands  of  linemen  and  tree  trimmers  from  around  the  country.     •  The  )meline  for  restora)on  is  heavily  dependent  on  the  severity  of  the  weather   event  and  the  extent  of  the  areas  affected.  An  extremely  severe  storm  can  result  in   outages  las)ng  a  number  of  weeks.     •  U)li)es  are  preparing  for  outages  before  they  happen  by  inves)ng  in  technology   to  more  quickly  and  accurately  pinpoint  problems.    
  • 20. 20" Electric  infrastructure  
  • 21. 21" Con)nued  Transmission  and     Distribu)on  Investment  Needed     Throughout  Texas   •  According  to  the  Texas  State  Data   Center,  10  million  new  residents   are  expected  in  Texas  by  2040.   •  From  October  2012  to  September   2013,  u)li)es  completed  $4.0   billion  in  transmission  projects,   including  $3.04  billion  related  to   the  CREZ  project.   •  The  total  includes  the  addi)on  or   upgrade  of  4,156  miles  of   transmission  circuits,  among  other   projects.   •  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  (map)  and  December  2013  (text)  
  • 22. 22" 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.  
  • 23. 23" Distribu)on  Infrastructure  Terms  
  • 24. 24" Remember  –  no  two  storms   are  alike •  Specific  damage  to  electric  system  will  be  different.   •  It  is  not  possible  to  forecast  in  advance  what  the  exact  damage  to  the   electric  system  will  be,  so…   •  It  is  not  possible  to  give  precise  outage  duraOon  esOmates  for   individual  locaOons  in  advance.  
  • 25. 25" •  Goal  –  restore  power  to  the  largest   number  of  people  in  the  shortest   amount  of  )me  quickly  and   efficiently   •  Approach:   •  All  electric  distribu)on  facili)es   that  did  not  sustain  damage  are   energized   •  Simultaneously  assess  damage   •  Damaged  electric  lines  are   repaired  beginning  at  the   substa)on  and  then  proceeding   outward  toward  the  ends  of  the   lines   •  Individual  services  lines  that  are   damaged  receive  a  lower  priority   for  restora)on  un)l  the  major   parts  of  the  distribu)on  system   are  repaired   Systema)c  Power  Restora)on  
  • 26. 26" Mutual  Assistance   •  Mutual  Assistance  is  a  na)on-­‐wide  program  of  electric  u)li)es  willing  to   safely  support  other  electric  u)li)es  during  major  events  on  a  not  for   profit  basis.   •  Groups  of  U)li)es  have  organized  by  Regions  and  have  formed  Regional   Mutual  Assistance  Groups.   •  They  voluntarily  help  each  other   restore  electric  service  aner   major  events,  such  as  ice  storms,   hurricanes,  tornadoes,  or  floods.   •  They  provide  a  rapid,  scalable  and   effec)ve  response  of  labor  and   equipment.  
  • 27. 27" Hurricane  Ike  Mutual  Assistance  
  • 28. 28" •  8,500  out  of  more  than  1   million  wood  distribu)on  poles   •  300,000  n.  of  wire  &  cable  out   of    approximately  140  million   n.     •  4,000  transformers  out  of   400,000   •  860,000  meals Hurricane  Ike  Logis)cs  Resources     •  More  than  1  million  gallons  of  fuel   for  7,000  vehicles   •  2    million  lbs.  of  ice   •  94,000  hotel  room  nights   •  5,000  +  cots  system-­‐wide   •  More  than  11,000  mutual   assistance  crews  from  35    states   and  Canada    
  • 29. 29" Pre-­‐storm:     Electric  service  )ps   •  Unplug  sensi)ve  electrical   appliances,  such  as  computers   and  TVs.     •  If  you  expect  flooding,  turn  off   electricity  at  the  circuit  breaker.       •  If  someone  depends  on   electricity  for  life-­‐sustaining   equipment,  you  need  to  make   alternaOve  arrangements  for   them  in  advance.   MAIN
  • 30. 30" Post-­‐storm:     Electric  safety  )ps   •  DO  call  your  uOlity  to  report  a  downed   power  line  or  other  electric  emergencies   •  Always  stay  away  from  power  lines!   •  Stay  away  from  standing  water;   energized  power  lines  could  be   submerged.   •  Treat  all  downed  lines  as  if  they  are   energized.  
  • 31. 31" Electric  Weatherhead   •  Check  your  home’s   weatherhead.   •  Any  weatherhead  problems   will  need  to  be  repaired  by   an  electrician  prior  to  service   being  restored.  
  • 32. 32" In  Summary   •  U)li)es  plan  year  round  for  hurricanes.   •  Hurricanes  present  logis)cal  challenges  for  the  u)lity.   •  U)lity  workers  and  mutual  assistance  crews  work  well   together  to  restore  service  safely  and  efficiently.   •  U)lity  customers  should  prepare  for  outages  las)ng  2  to   4  weeks,  or  more,  depending  on  the  severity  of  the   storm.  
  • 33. 33" Web: Twitter: Facebook: AECT Advocacy Email: