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Legislative Advertising Paid For by: JuliaRathgeber, Association ofElectric Companies ofTexas
1005Congress, Suite 600,Aust...
Generation Companies
Transmission & Distribution Utilities
AECT CompanieswithinERCOT
www.aect.net (512) 474-6725
2
Retail ...
Western Electricity Coordinating
Council (WECC)
Midcontinent Independent System
Operator (MISO)
Southwest Power Pool (SPP)...
Overview of ERCOT
www.aect.net (512) 474-6725
4
ERCOT: By the Numbers
• 90% of the electric load in Texas is in ERCOT
• 75...
The ERCOT CompetitiveRetailElectric Market is Providing
Customer Benefits
www.aect.net (512) 474-6725
5
Key Facts on the C...
Lower Prices AvailableToday than
BeforeCompetition Began
www.aect.net (512) 474-6725
6
Service Area
Average Fixed-Price
Of...
Large Customers in the Market HaveAmong The
LowestElectricity Prices in the Nation
www.aect.net (512) 474-6725
7
Large ind...
Large Customers in the Market HaveAmong The
LowestElectricity Prices in the Nation
www.aect.net (512) 474-6725
8
Large com...
Hot topics
9
Ratemaking, Routingand Respondingto Threats
Ratemaking: Two BasicComponents of theRate case
www.aect.net (512) 474-6725
10
Determination of Revenue Requirements
The a...
Ratemaking: Statutory Timelineof a Rate Case
www.aect.net (512) 474-6725
11
Day 1 Day 185Day 35 Day 135
Utility files a st...
Ratemaking: Concerns RegardingRegulatory Lag
www.aect.net (512) 474-6725
12
• By statute, a rate case is supposed to be
pr...
Routing: Transmission Line Routing Process
www.aect.net (512) 474-6725
13
1. The utility files an application with the PUC...
Routing: Timelineof Transmission Line Construction
www.aect.net (512) 474-6725
14
• While certain types of generation can ...
Routing: Eminent DomainProcess
www.aect.net (512) 474-6725
15
LEGEND
LO = Land Owner
ED = Eminent Domain
SC = Special Comm...
www.aect.net (512) 474-6725
16
Threats: Resistance vs. Response
o Each of the varied facilities that
comprise the electric...
www.aect.net (512) 474-6725
17
Threats: Cyber Attacksand MagneticDisturbances
Avoidance and Preparation
o Good Cyber Hygie...
www.aect.net (512) 474-6725
18
Threats: Recent Activities
ResponsetoMajor OutageThreats
o ERCOT Grid Resilience Working Gr...
key takeaways
www.aect.net (512) 474-6725
19
• Competitive electricity price offers remain low, and
customers have a wide ...
How To Reach Us
www.aect.net (512) 474-6725
20
For background on electric
markets, environmental data and
Electricity 101
...
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Legislative Staff Briefing - January 26, 2017

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Includes updates on electricity prices in the competitive market, utility ratemaking, eminent domain proceedings and protecting the electric grid

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Legislative Staff Briefing - January 26, 2017

  1. 1. Legislative Advertising Paid For by: JuliaRathgeber, Association ofElectric Companies ofTexas 1005Congress, Suite 600,Austin,TX 78701 • 512-474-6725• www.aect.net January26, 2017 LegislativeStaff Briefing: Updateon the ElectricMarket
  2. 2. Generation Companies Transmission & Distribution Utilities AECT CompanieswithinERCOT www.aect.net (512) 474-6725 2 Retail Electric Providers Total ERCOT Capacity: >77,000 MW
  3. 3. Western Electricity Coordinating Council (WECC) Midcontinent Independent System Operator (MISO) Southwest Power Pool (SPP) AECT CompaniesOutside of ERCOT www.aect.net (512) 474-6725 3 Total ERCOT Capacity: >77,000 MW
  4. 4. Overview of ERCOT www.aect.net (512) 474-6725 4 ERCOT: By the Numbers • 90% of the electric load in Texas is in ERCOT • 75% of ERCOT’s load is in the competitive market, including 24 million customers • Over 550 generating units, providing 77,000 MW of generating capacity during peak demand • 46,500 miles of high-voltage transmission ERCOT Responsibilities • System reliability – planning and operations • Wholesale market settlement for electricity production and delivery • Retail switching process for customer choice • Open access to transmission ERCOT region
  5. 5. The ERCOT CompetitiveRetailElectric Market is Providing Customer Benefits www.aect.net (512) 474-6725 5 Key Facts on the Competitive Retail Market in ERCOT – Price offers are substantially lower than prices available just before competition began – Texas’ national electric price ranking has improved since the market opened in 2002 – 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
  6. 6. Lower Prices AvailableToday than BeforeCompetition Began www.aect.net (512) 474-6725 6 Service Area Average Fixed-Price Offer (12-month term, no usage fees/credits) Lowest Fixed-Price Offer (12-month term, no usage fees/credits) Lowest Variable Price Offer Available Dec. 2001 prices, not adjusted for inflation Dec. 2001 prices, adjusted for inflation AEP Texas Central 9.4¢/kWh 5.0¢/kWh 7.9¢/kWh 9.6¢/kWh 12.8¢/kWh AEP Texas North 9.4¢/kWh 5.6¢/kWh 7.9¢/kWh 10.0¢/kWh 13.3¢/kWh CenterPoint Energy 8.8¢/kWh 4.8¢/kWh 7.8¢/kWh 10.4¢/kWh 13.8¢/kWh Oncor 8.2¢/kWh 4.4¢/kWh 7.0¢/kWh 9.7¢/kWh 12.9¢/kWh TNMP 8.6¢/kWh 5.0¢/kWh 7.8¢/kWh 10.6¢/kWh 14.1¢/kWh Sources: PUC Historical Data, Bureau of Labor Statistics Inflation Calculator (33.0% inflation since December 2001); www.powertochoose.org offers as of January 2, 2017 January 2017 December 2001
  7. 7. Large Customers in the Market HaveAmong The LowestElectricity Prices in the Nation www.aect.net (512) 474-6725 7 Large industrial customers in the ERCOT market pay 23% less than the national average for electricity Source: Energy Information Administration data
  8. 8. Large Customers in the Market HaveAmong The LowestElectricity Prices in the Nation www.aect.net (512) 474-6725 8 Large commercial customers in the ERCOT market pay 28% less than the national average for electricity Source: Energy Information Administration data
  9. 9. Hot topics 9 Ratemaking, Routingand Respondingto Threats
  10. 10. Ratemaking: Two BasicComponents of theRate case www.aect.net (512) 474-6725 10 Determination of Revenue Requirements The amount of gross revenues needed by a utility to cover its operating expenses, depreciation, taxes and other expenses Determination of Rate Structure The rates paid by each customer class to provide the necessary revenue as determined in the revenue requirements 1. 2.
  11. 11. Ratemaking: Statutory Timelineof a Rate Case www.aect.net (512) 474-6725 11 Day 1 Day 185Day 35 Day 135 Utility files a statement of intent to file a rate case with Original Jurisdiction authorities (either its cities or the PUC). Original Jurisdiction authorities also have the authority to demand the utility file a rate case. After the rate case is filed, the PUC may suspend the effective date of proposed rates by an additional 150 days beyond the notification period After filing the rate case, PUC Staff, cities, affected ratepayer groups and OPUC may intervene and begin sending discovery requests to the utility. • Rate cases are almost always referred to SOAH, where an ALJ establishes a procedural schedule to allow the PUC to decide the case before the deadline. • Intervenors then file written testimony on the rate application. • The utility may then file testimony rebutting intervenor testimony. • About 70% of rate cases are settled without a hearing. If a hearing occurs, it’s normally around 100 days after filing. • The ALJ will issue a proposed order (if no hearing) or a proposal for decision (if contested) and refer the case back to the PUC. The PUC must approve or deny the case by day 185, or the case is deemed approved. The utility may voluntarily extend the timeline.
  12. 12. Ratemaking: Concerns RegardingRegulatory Lag www.aect.net (512) 474-6725 12 • By statute, a rate case is supposed to be processed in 185 days • The average time to process an electric rate case in Texas is one year • Since 1989: – 30 out of 33 electric rate cases in Texas have exceeded the 185-day statutory deadline. – One-third of those took longer than 16 months to process. Examples of Recent Rate Costs and Duration – Oncor Electric Delivery, Dockets 35717 & 36530 - $8.6 million (13 months) – Entergy Gulf States, Docket 34800 - $9.5 million (17 months) – AEP Texas, Dockets 33309, 33310 & 34301 - $6.4 million (13 months) – Southwestern Public Service Co., Docket 32766 - $5.6 million (14 months) – AEP Texas Central Co., Dockets 28840 & 31433 - $4.3 million (21 months)
  13. 13. Routing: Transmission Line Routing Process www.aect.net (512) 474-6725 13 1. The utility files an application with the PUC to obtain a Certificate of Convenience and Necessity (CCN), which is assessed by the PUC • Consideration include: the need for service; whether the route uses existing rights- of-way; parallels other rights-of-way; follows property lines; and conforms with the policy of prudent avoidance to limit overall impact of the line 2. Landowners who would be affected by a new line receive notice; landowners can informally file a protest or formally participate in the case as an intervenor 3. An administrative law judge (ALJ) holds a prehearing conference to set a schedule for the case 4. Parties to the case conduct discovery to gather facts on the case 5. An ALJ hearing is held, with cross-examination of witnesses. The ALJ and the PUC will rely on factual information submitted as evidence filed in the docket and presented during discovery 6. The ALJ makes a recommendation to the PUC, which is called a proposal for decision 7. The PUC Commissioners rule on the case and may approve it, modify it, request further action by the ALJ or deny the case. After the PUC’s ruling, parties may appeal the decision Brochure provided to landowners affected by a proposed transmission line
  14. 14. Routing: Timelineof Transmission Line Construction www.aect.net (512) 474-6725 14 • 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.
  15. 15. Routing: Eminent DomainProcess www.aect.net (512) 474-6725 15 LEGEND LO = Land Owner ED = Eminent Domain SC = Special Commissioner
  16. 16. www.aect.net (512) 474-6725 16 Threats: Resistance vs. Response o Each of the varied facilities that comprise the electric grid face many threats to their reliable operation o Utilities must weigh the risk and the likelihood of each threat and the most effective, appropriate response to limit outages o The complexity of the electric grid is part of its strength, allowing for greater reliability and more effective recovery o The focus of utilities is to quickly respond to each threat, by having protocols and replacement parts in place to recover critical systems
  17. 17. www.aect.net (512) 474-6725 17 Threats: Cyber Attacksand MagneticDisturbances Avoidance and Preparation o Good Cyber Hygiene: Maintain best practices, share information with other utilities and hold regular briefings to avoid human error, such as clicking on a malicious email or installing Trojan horse software o Ongoing briefing and Communications: Communicate with federal agencies regarding grid hacking activities and potential EMP attacks o Investment: Major hardware and software investment specifically aimed at identifying activity by hackers or rogue states, plus investment in cyber security divisions staffed by employees with financial industry and military backgrounds Response in case of Major outage o Mitigation: Ensure systems can be segmented from one another to limit the impact of a cyber attack, and determine best practices for hardening against magnetic disturbances o Recovery: Ensure critical facilities are primed for backup and quick recovery o Restoration, Cooperation and Recovery of Systems: As with other types of outage, utilities are designed to be restored through robust systems, cooperation with government entities and able to be rebuilt
  18. 18. www.aect.net (512) 474-6725 18 Threats: Recent Activities ResponsetoMajor OutageThreats o ERCOT Grid Resilience Working Group is currently assessing major threats and response strategies o GridEx is an industry-wide exercise assessing grid readiness in case of physical or cyber attack o DOE developed a draft National Transformer Strategy in 2015, which is under review by the Department ProtectionagainstTechnologyThreats o PUC has opened a rulemaking specific to identifying technology and magnetic threats to the grid o DHS Electric Sector Information Sharing and Analysis Center gathers industry information on cyber threats to promote best practices o DHS National Cyber and Communications Integration Center works with utilities; federal, state and local governments; and law enforcement to assess and prepare for cyber threats o Utilities must comply with Presidential Policy Directive 21 on “Critical Infrastructure Security and Resilience” o EEI Electricity Subsector Coordinating Council works with federal agencies to assess current activities and develop strategies to reflect current threats Mitigationof MagneticThreats o PUC has opened a rulemaking specific to identifying technology and magnetic threats to the grid o DOE and EPRI Joint Electromagnetic Pulse Resilience Strategy is ongoing o DHS EMP Protection Guidelines developed in 2014 o FERC GMD Reliability Standards Rulemaking Process is ongoing o DHS Solar Storm Mitigation forecasting, to be completed in coordination with NASA and NOAA in 2016 o NOAA, DHS and the White House Office of Science and Technology Policy report on improving response to geomagnetic disturbances was released in 2015 Utilities,working withfederaland stateenergyagencies, Constantlyseek opportunitiesto improvecoordination and preparationfor alltypesof threat thatcouldresultina major outage
  19. 19. key takeaways www.aect.net (512) 474-6725 19 • Competitive electricity price offers remain low, and customers have a wide array of choices • Ensuring utilities can recover their costs promotes investment in the grid and reliable electric delivery • Power line routing is determined through an effective stakeholder process at the PUC • Utilities, federal agencies and stakeholders continue to take significant steps to protect the grid from cyber attacks and acts of terrorism
  20. 20. How To Reach Us www.aect.net (512) 474-6725 20 For background on electric markets, environmental data and Electricity 101 Regular updates from AECT and its member companies Keep up with pictures and links to latest documents released by AECT AECT.net @aectnet AECT Advocacy on Facebook Coming soon: an easy way to receive updates from AECT TheAECT App

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