Update on the Electric Industry in Texas Legislative Staff Brieﬁng! February 18, 2011 !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 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
AECT Member Companies!Within ERCOT! Retail Electric Providers Transmission and Distribution Utilities Generation Companies 3
AECT Companies!Outside of ERCOT! SERC Reliability Corporation Southwest Power Pool (SPP) Western Electricity Coordinating Council (WECC) 4
February 2:!Controlled Outages Throughout Texas!• On February 2, a day when each major city in Texas faced morning temperatures below 25 degrees, 82 generation units either went offline or were unable to start.• At the height of the outages, over 8,000 MW of generation was unavailable.• ERCOT, the electric grid operator that covers most of the state, and each utility have procedures governing emergencies like this, and as the problem rapidly worsened, Texans faced a series of controlled outages.• As designed, the controlled outages prevented much more widespread and long-lasting blackouts. 6!
More than 8,000 MW of Generation Dropped Off Overnight! February 2, 2011 7!Source: ERCOT Presentation to Joint Senate Committees, February 15, 2011
Learning from the Power Outages!Severe Weather Was the Cause• February 2-4 saw the coldest sustained temperatures in Texas in 20 years.• From mechanical failures to pressure drops in natural gas supply lines to inoperable equipment, each reported cause of a generation outage or reduction in output was related to the severe cold.Different Types of Power Plants Were Affected• Coal and natural gas power plants were among the units affected.Plants Were Affected Throughout the State• Power plants were affected throughout the state, and the power supply was constrained to the Rio Grande Valley all the way to El Paso.• Plants affected were operated by both competitive and regulated owners. 8!
The generation loss was system-wide and covered units of all ages and multiple types of fuel! Generation Range 0 – 99 MW 100 – 199 MW 200 – 399 MW 400 – 799 MW ≥ 800 MW 9!Source: ERCOT Presentation to Joint Senate Committees, February 15, 2011
Learning from the Power Outages!Rolling Outage Protocols Successfully Protected the Grid• The ERCOT and utility rolling outage protocols are designed to prevent the entire grid from failing. – ERCOT directs the utility to shed load; the utility then select customer areas (feeders) to perform rolling outages.• The protocols attempt to minimize the impact on individual consumers while ensuring the electric grid remains stable, resulting in no further harm.There Are Lessons to Be Learned• Winterization procedures, communications protocol and regulatory oversight of natural gas for power generation have all been discussed at recent hearings. 10!
Prices in the Competitive Electric Market in ERCOT ! 11
Potentially High Winter !Electric Bills!• Typically, the largest portion of customers’ electric bills are calculated based on the price of electricity and the amount consumed.• So even though electric prices have declined substantially in recent years, residents may still see increased electric bills due to higher consumption. 12!
Lower Bills Through!Choice and Energy Efﬁciency!• Customers in the competitive retail electric market can visit www.powertochoose.org to learn more about available options.• All 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 also call 2-1-1, the Texas Health and Human Service Commissions 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 – Texas Is Hot: www.texasishot.org – U.S. Department of Energy: www.energy.gov/energyefficiency – Get Energy Active: www.getenergyactive.org 13!
Natural Gas Prices Have Been VolatileSince 2000!• Through 1999, natural gas prices were relatively stable, but the cost of this key commodity has fluctuated greatly since 2000, with three exceptionally large peaks during the past decade.’• While prices have fallen over the past 18 months, natural gas prices today are still double the price of gas in 1999.• Despite this volatility, consumers have offers available in the market lower than before competition began. 14!
ERCOT Generation Mix More Gas- Heavy than U.S. Average! ERCOT U.S. Average Other Energy (MWh) Wind Renewable Petroleum 8% 1% (Mostly Hydro) 1% Natural Gas Nuclear 9% 21% Nuclear 13% 38% 20% 40% Natural Gas 48% Coal Coal Other Wind Oil 2% Renewable 11% (Mostly Hydro) 6% Capacity (MW) Nuclear Natural Gas 6% 14% 39% 22% Nuclear 10% Coal 59% 31% Natural Gas CoalNote: 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. 15!Sources: ERCOT (2010 data), EIA (2009 data, latest available)
Regions Outside ERCOT Part of !Larger, Multi-State Grids! (ERCOT) 16!
ERCOT far More Dependent !On Gas Than Neighboring Power!Regions! % MWh from Natural Gas % MWh from Coal % MWh from Nuclear % MWh from Hydro % MWh from Other 17!
Competitive electricity prices still track natural gas, but enable customer choice and lower prices NYMEX Average 12-Month StripNatural Gas vs. Texas Residential Retail Average Lowest OfferElectricity Prices In Areas Now Open to Before Electric With Electric Average Competitive OfferCompetition Competition Competition1992 – 2011 YTD; $/MMBtu and ¢/kWh Residential Electricity Price NYMEX Natural Gas, 12-month Strip Annual Average (¢/kWh)1 ‘02-11 Natural Gas Avg: Annual Average ($/MMBtu) $6.65/MMBtu (+215%) ‘92-99 Natural Gas Avg: $2.11/MMBtu1Average annual residential electric prices at 1000 kWh/month in the 5 TDU areas opened to competition in 2002; pre-competition prices based on filed tariffs; post-competition prices based on Power to Choose offerings and PUC data 18 ! 18Sources: NYMEX, PUC, Power to Choose website (latest data as of 2/7/11)
CENTS PE R KWH 5 7 9 11 13 15 17 19 LOWEST DALLAS/FT WORTH PRICE LOWEST HOUSTON PRICE LOWEST LEWISVILLE PRICE LOWEST ABILENE -‐ 1 YR FIXED LOWEST ABILENE PRICE Idaho LOWEST CORPUS CHRISTI PRICE North Dakota Utah Washington Na;onal Average LOWEST DALLAS/FT WORTH -‐ 1 YR LOWEST LEWISVILLE -‐ 1 YR FIXED FIXED Louisiana Nebraska Arkansas LOWEST HOUSTON -‐ 1 YR FIXED Wyoming Oregon LOWEST CORPUS CHRISTI -‐ 1 YR FIXED Missouri South Dakota West Virginia Kentucky Oklahoma Montana Georgia New Mexico Kansas Arizona Every Competitive Area in ERCOT Has North Carolina Sources: Energy Information Administration, www.powertochoose.org Tennessee Variable and 1-Year Lock Offers Available Indiana Virginia Colorado Mississippi Iowa that are Lower than the National Average Price Minnesota Alabama South Carolina Ohio US AVERAGE Florida All Data from November 2010 Illinois Michigan Nevada Pennsylvania RESIDENTIAL RETAIL ELECTRICITY PRICES Wisconsin District of Columbia Maryland Delaware MassachuseTs California Maine Vermont Rhode Island New Jersey Alaska New Hampshire New York ConnecVcut Hawaii 19!
Texas competitive electric prices comparewell to the rest of the nation 2001 State Ranking (Pre-Competition)¢/kWh November 2010 (Latest Available) State Price Rank Average lowest offer in Improved by 8 Spots Texas competitive areas in with Competition¢/kWh February ‘11 – 6.7¢/kWh Average lowest offer November‘10 – 7.3¢/kWhSources: EIA average annual residential rates for 2001 & Nov. 2010 monthly data (latest available information). Average of lowestavailable prices in the 5 competitive TDU areas from www.powertochoose.org (11/16/10 and 2/14/11) for residential customers usingan average of 1,000 kWh per month 20!
Web: AECT.netBlog: AECTnet.wordpress.comTwitter: twitter.com/AECTnetFacebook: Association of Electric Companies of Texas, Inc.Email: email@example.com 21!