Legislative Staff Briefing: Q&A


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Questions and answers on current electric issues, including the retail market, wholesale investment, customer protections and smart meter implementation in Texas.

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Legislative Staff Briefing: Q&A

  1. 1. 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
  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. 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 population. • 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. 6
  7. 7. 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 AEP Texas 52 11.6¢/kWh 10.0¢/kWh 10.4¢/kWh 8.8¢/kWh Central AEP Texas 51 10.5¢/kWh 9.3¢/kWh 9.5¢/kWh 8.4¢/kWh North CenterPoint 53 11.1¢/kWh 10.0¢/kWh 9.8¢/kWh 8.4¢/kWh Energy 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. 7
  8. 8. 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. 1 Electric price offers for residential customers using an average of 1,000 kWh per month 8 Sources: NYMEX; www.powertochoose.org
  9. 9. 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 Commodities 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
  10. 10. Q: How do competitive price offers compare with rates in other states? • Texas’ electric price offers compare favorably to the states with which we compete to attract and retain business. • 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 electricity. 10
  11. 11. 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. 11
  12. 12. Q: Are electricity prices in Texas outpacing those in the rest of the nation? • With the expiration of the price-to- beat, all Restructured customers could States receive US Average (excl. TX) competitive offers (excl. TX) 16% in January 2007. Gas-Dependent 12% States (excl. TX) 6% • Over that period, competitive price Texas offers in Texas -1% have fallen 20%. • Other states with restructured markets and states using Competitive natural gas as Offers in Texas their primary fuel -20% have seen increases. Source: EIA average annual residential rates for December 2006 and December 2009 monthly data (latest available information that includes usage) 12
  13. 13. 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. 1 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
  14. 14. 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 www.powertochoose.org. • 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 programs. – 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: 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 14
  15. 15. 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 REP • 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 15
  16. 16. Q: Are there protections in the wholesale market to ensure generators are operating fairly? • 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 market. – 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. 16
  17. 17. Q: Do we have enough generation to meet growing demand? • The competitive market has steadily added new generation and greater efficiency to the wholesale market. • Generators in the competitive market shoulder the risk of building new power plants, bringing efficient, cost- effective generation to consumers. 17
  18. 18. Q: Do we have enough generation to meet growing demand? • However, ERCOT will need additional generation by 2014. 18
  19. 19. 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 order. • 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 entities. • 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. 19
  20. 20. Q: Are the new advanced metering systems accurate? • Upon customer request, Oncor tested more than 4,500 smart meters on-site, all confirming accuracy. – 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. 20
  21. 21. Questions? 21