Update on the Texas Electric Industry:
Questions & Answers
April 22, 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
• AECT is an advocacy group composed of member companies committed to:
- Ensuring a modern, reliable infrastructure for the supply & delivery of
- Supporting efficient competitive markets that are fair to customers and
- 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.
U.S. Divided into Eight
• 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
• Electric systems in Texas are located
within four separate reliability regions:
- Texas Regional Entity (TRE),
which oversees participants in the
Electric Reliability Council of
- SERC Reliability Corporation;
- Southwest Power Pool (SPP); and
- Western Electricity Coordinating
AECT Member Companies
Retail Electric Providers
Transmission and Distribution Utilities
Outside of ERCOT
SERC Reliability Corporation
Southwest Power Pool (SPP)
Western Electricity Coordinating
Key Takeaways on the Competitive
Electric Market in ERCOT
• Electric market consumers in competitive areas have many plans to choose from.
• Natural gas prices influence electric prices in Texas.
• Natural gas prices fell during much of 2009; because of the robust competition
among multiple REPs, residential electric price offers have fallen as well.
• Even as other energy commodities rose since 2001 (gasoline, crude oil, natural
gas and coal), robust competition has helped push retail electric prices down.
• Available prices in the ERCOT competitive electric market are falling significantly,
a stark contrast to the national average which is rising.
• The competitive market includes many safeguards and protections and oversight
for both retail and wholesale customers.
• Competition has brought greater efficiency to the wholesale market, spurring
construction of generation needed to meet Texas’ growing economy and
• Advanced metering systems, which will provide new tools for consumers to lower
consumption while enhancing grid reliability, are undergoing independent tests to
demonstrate their accuracy.
Q: What offers are available in the
competitive market today?
Number of 12-Month Fixed Average 12-Month Fixed Lowest 12- Lowest 6- Lowest
Service Area Price Offers Price Offer Month Fixed Month Fixed Variable Price
(including renewable offe r s ) (including renewable offe r s ) Price Offer Price Offer Offer
52 11.6¢/kWh 10.0¢/kWh 10.4¢/kWh 8.8¢/kWh
51 10.5¢/kWh 9.3¢/kWh 9.5¢/kWh 8.4¢/kWh
53 11.1¢/kWh 10.0¢/kWh 9.8¢/kWh 8.4¢/kWh
Oncor 53 10.3¢/kWh 9.2¢/kWh 9.5¢/kWh 7.8¢/kWh
TNMP 51 10.6¢/kWh 9.3¢/kWh 9.5¢/kWh 8.0¢/kWh
• Customers have over 100 plans to choose from overall, including
variable, fixed and indexed pricing. In addition to month-to-month
options, plans include 6, 12, 18, 24, 36 and 60-month terms.
Q: Why did average prices rise during
certain years over the past decade?
• Electricity price offers tend to show the effect of natural gas prices.
Electric price offers for residential customers using an average of 1,000 kWh per month
Sources: NYMEX; www.powertochoose.org
Q: How have energy industry prices
changed since 2001?
• Despite large increases in other energy commodities -- as well as inflation --
electric prices have decreased in ERCOT since December 2001.
Percentage Change in
December 2001 - April 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 April 19, 2010; coal percentage increase is approximate.
Inflation covers period from 2001 to 2009 9
Q: How do competitive price offers compare
with rates in other states?
• Texas’ electric price
favorably to the states
with which we compete
to attract and retain
• In fact, Texas
residential price offers
in the competitive
electric market are
lower than those of the
average price in other
large states, as well as
states that, like Texas,
rely heavily on natural
gas to generate
Q: How do competitive price offers compare
with rates in other states?
Customers in each
competitive region have
prices available that are
below the national average.
Q: Are electricity prices in Texas outpacing
those in the rest of the nation?
• With the expiration
of the price-to-
Restructured customers could
US Average (excl. TX) competitive offers
(excl. TX) 16% in January 2007.
States (excl. TX)
6% • Over that period,
Texas offers in Texas
-1% have fallen 20%.
• Other states with
Competitive natural gas as
Offers in Texas their primary fuel
-20% have seen
Source: EIA average annual residential rates for December 2006 and December
2009 monthly data (latest available information that includes usage) 12
Q: How do competitive prices compare with
other electric market structures in Texas?
• Prices in competitive areas have decreased since the market opened, while
other structures have seen increases.
For residential customer using 1,000 kWh; depicts latest available consistent data for end points (4/10 for competitive areas and 3/10 for other areas)
Sources: Public Utility Commission of Texas (4/16/10); powertochoose.org (4/12/10) 13
Q: What can customers do to lower
their electric bills?
• Many REPs offer innovative programs to help customers manage their electric
usage. Customers may want to contact their REP to see what’s available.
• Customers interested in lowering their price can contact their REPs or other
REPs in their region. To see what offers are available, customers can visit
• Customers have many opportunities to lower their electric bills by using
available technology to help conserve energy.
– 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
– Customers can also call 2-1-1, the Texas Health and Human Service Commission's
information and referral network to learn about programs available in the area.
• Below are some resources to help customers learn more.
– Texas Department of Housing and Community Affairs:
– Texas Is Hot: www.texasishot.org
– U.S. Department of Energy: www.energy.gov/energyefficiency
– Get Energy Active: www.getenergyactive.org
Q: What protections are in the market
for retail customers?
Among other requirements, REPs serving residential customers must:
• Register with the PUC and meet financial • Make Spanish-language support available to
requirements set by the Commission customers
• Communicate clearly with consumers regarding • Place customer deposits in interest-bearing
notice of contract expiration accounts and return that interest to customers when
• Demonstrate creditworthiness to purchase power the deposit is returned
to serve its customers • Follow a mandated timeline for disconnection of
• Demonstrate the technical ability to supply customers
electricity • Provide notice in case of disconnection
• Maintain privacy of customer information • Investigate any customer complaint within 21 days
• Not discriminate among customers • Provide a Terms of Service Statement detailing
• Not add charges to a customer’s electric bill for contract terms, cancellation penalties, deposit
services not requested by the customer requirements, fees, payment arrangement options,
• Provide a “Your Rights as a Customer” disclosure how to cancel service, and other obligations of the
• Provide an Electricity Facts Label to allow for an
“apples-to-apples” comparison among REPs • Allow a customer to cancel a service agreement
within three federal business days after receiving
• Make deferred payment plans available for those the terms of service
expressing an inability to pay
• Allow a customer to cancel the switch upon
• Provide the LITE-UP discount for low-income receiving notification that the switch will occur
Texans during summer months
Even this brief sampling of regulations
highlights that customers are protected
Q: Are there protections in the wholesale
market to ensure generators are operating
• The law limits generation ownership and control to 20 percent within ERCOT.
– If a power generation company owns and controls more than 20 percent of the generation
capacity in a power region, it must submit a market power mitigation plan to the PUC.
• PUC has the authority to monitor the market for the presence of market power; the
PUC has established the market oversight division to address market power issues.
– Legislation passed in 2005 created a new Independent Market Monitor (IMM) position
housed within ERCOT and reporting to the PUC which polices activities in the wholesale
– Since 2007, the IMM has assumed the role of ensuring the competitiveness of the ERCOT
wholesale market through investigations and proposals for market rule changes.
– The PUC requires quarterly reports of electric wholesale transactions, to increase market
transparency and help identify market power abuse.
• The PUC may seek injunctions, impose penalties and revoke certificates to remedy
the existence of market power.
– During the 2005 legislative session, the Legislature reviewed the PUC’s penalty authority
and increased the penalty authority fivefold.
– The PUC has been active in exercising its increased penalty authority.
Q: Do we have enough generation to meet
• The competitive
market has steadily
to the wholesale
• Generators in the
shoulder the risk of
building new power
Q: Do we have enough generation to meet
• However, ERCOT
will need additional
Q: Are there any plans to open
areas outside ERCOT to competition?
• Not in the near future. The Legislature has enacted statutes to delay
competition in the Entergy, SWEPCO, and Xcel service territories. El Paso
Electric’s transition to competition is also delayed in accordance with a PUC
• Each of these service areas is part of
multi-state electric grids, with differing
regulations. In many cases, vertically
integrated utilities purchase wholesale
power from certain competitive
• Given the complexities of multiple
layers of regulation, combined with the
lack of competitive market activity in
states adjacent to Texas, none of the
non-ERCOT regions have immediate
plans to implement retail competition.
Q: Are the new advanced metering
• Upon customer request, Oncor tested more than 4,500 smart meters on-site, all confirming
– In the Oncor region, 34 independent tests were conducted by a customer-selected testing company,
all confirming accuracy.
– Oncor has conducted 40 side-by-side demonstrations of traditional and smart meters over a 4 week
period. A majority of the cumulative weekly readings have shown a 0 –3 kWh difference, with the
highest cumulative difference over four weeks being 12 kWh, which translates to just over a dollar.
• A key component of CenterPoint Energy’s commitment to meter testing is
performing side-by-side advanced meter and traditional meter tests.
– There are currently 21 side-by-side tests, showing a cumulative difference of between 0 and 11 kWh
over the four week testing period.
– The average cumulative difference found is 3.2 kWh.
• AEP Texas has recently begun installation of its advanced meters, which
undergo rigorous testing prior to deployment.
– The company will also be conducting side-by-side tests to confirm accuracy as well as working with
an independent testing firm designated by the PUC.
• Oncor, CenterPoint Energy, and AEP are working with the PUC to finalize a plan
for independent testing of smart meters requested by customers, as well as
system-wide samples of smart meters identified by the independent company. In
addition, an independent company is conducting reviews of the companies’
smart meter systems and processes.