The document discusses the history and current state of the electric industry in Texas. It notes that Texas established a competitive electric market in 1999 that has led to innovation and customer choice. It summarizes the key players in the Texas market, including retail electric providers and transmission and distribution utilities. The document also discusses trends in electric generation, transmission infrastructure needs, and environmental performance to meet the growing demand of Texas's population and economy.

1. The
Texas
Electric
Industry:
A
History
of
Innova9on
Legisla)ve
Staff
Briefing
December
12,
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 • www.aect.ne t

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.

3. 3
AECT Companies
Within ERCOT
Retail Electric Providers
Transmission and Distribution Utilities
Total ERCOT Generation Companies
Capacity:
>74,000 MW

4. 4
AECT Companies
Outside of ERCOT
Midcontinent Independent
System Operator (MISO)
Southwest Power Pool (SPP)
Western Electricity Coordinating
Council (WECC)

5. 5
AECT white paper on Texas’
history of innovation in the electric industry
• With the passage of Senate Bill 7 in 1999,
Texas created a platform for adoption of some
of the most innovative, advanced
technologies in the electricity industry.
• Over the subsequent 15 years, state
regulators and elected officials have tended
the market, allowing it to grow and meet
customers’ needs in ways never imagined.
• Several factors will push Texas to innovate
further:
• Texas’ population is forecasted to grow
• Texas’ economic engine – including the
oil and gas industry – remains strong
• Homes and appliances continue to use
electricity more efficiently
• New appliances, devices, and uses for
electricity continue to become available
• Regulatory pressure will remain to
The Electric Industry in Texas:
Fifteen Years of Innovation, With More to Come
December 2014
reduce emissions from electricity
generation aect.net i

6. 6
Outside ERCOT: A single company provides
retail, transmission & distribution and
generation services in each area
Power Flow
Financial Flow
Regulated
• In fully regulated markets, the PUC sets retail rates charged to end-use customers.
• 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 unregulated entities.
• New power plants in these regions can be built by both regulated entities and certain unregulated
entities or qualifying facilities.

7. 7
ERCOT: Separate companies provide retail,
transmission & distribution and generation
services
Power Flow
Financial Flow
Regulated
• In the competitive market, consumers have multiple retail electric providers (REPs) and service
plans to choose from.
• Wholesale and retail prices are set by competitive market forces, while the PUC sets transmission
and distribution rates.

8. 8
The Competitive Retail Market in ERCOT
• REPs compete for customers, finding new and innovative ways to differentiate
themselves.
• Texas has been recognized for having the best competitive retail electric market in
North America for seven consecutive years, according to an annual report released by
the Distributed Energy Financial Group.
• Today, most residential and commercial customers in the competitive market have
dozens of choices for electric service that offer a wide array of customer benefits.
• Customers can choose based on price, as well as company reputation, renewable
power, innovative pricing mechanisms, and the provision of other innovative products
and services, like time-of-use rates.
• With these and other growth opportunities on the horizon, Texas’ leading competitive
electricity market and the corresponding customer benefits will continue to rise.

9. Texas-New Mexico Power Co.
72 One-Year Fixed Price Offers
9
REPs and offers in large competitive
regions of Texas
AEP Texas North
Service Territory
76 One-Year Fixed Price Offers
263 Total Offers
AEP Texas Central
Service Territory
72 One-Year Fixed Price Offers
242 Total Offers
Source: Power to Choose, as of November 19, 2014
Oncor
Service Territory
85 One-Year Fixed Price Offers
296 Total Offers
Service Territory
243 Total Offers
CenterPoint Energy
Service Territory
88 One-Year Fixed Price Offers
300 Total Offers

10. 10
Competitive electric offers are significantly
below the last regulated rates of 2001
Service Area
November 2014 December 2001
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
11.0¢/kWh 8.8¢/kWh 6.9¢/kWh 9.6¢/kWh 12.9¢/kWh
AEP Texas North
11.0¢/kWh 8.8¢/kWh 6.8¢/kWh 10.0¢/kWh 13.4¢/kWh
CenterPoint
Energy
10.7¢/kWh 8.7¢/kWh 6.2¢/kWh 10.4¢/kWh 14.0¢/kWh
Oncor
9.7¢/kWh 7.7¢/kWh 5.2¢/kWh 9.7¢/kWh 13.0¢/kWh
TNMP
10.5¢/kWh 8.3¢/kWh 6.6¢/kWh 10.6¢/kWh 14.2¢/kWh
!
Sources: PUC Historical Data, Bureau of Labor Statistics - Consumer Price Index (34.4% inflation since 2001),
www.powertochoose.org offers as of November 3, 2014

11. Texas competitive market prices compared
with those of other states
11
0"
2"
4"
6"
8"
10"
12"
14"
16"
18"
20"
U.S. Energy Information Administration, latest available data as of November 19, 2014
LOWEST"LEWISVILLE"PRICE"
LOWEST"ABILENE"PRICE"
LOWEST"DFW"PRICE"
LOWEST"CORPUS"CHRISTI"PRICE"
LOWEST"DFW"PRICE":"1"YR"FIXED"
LOWEST"HOUSTON"PRICE"
LOWEST"ABILENE"PRICE":"1"YR"FIXED"
LOWEST"LEWISVILLE"PRICE":"1"YR"FIXED"
LOWEST"HOUSTON"PRICE":"1"YR"FIXED"
Washington"
LOWEST"CORPUS"CHRISTI"PRICE":"1"YR"FIXED"
West"Virginia"
Louisiana"
Arkansas"
Kentucky"
Oklahoma"
Tennessee"
Idaho"
Oregon"
Montana"
North"Dakota"
Wyoming"
South"Dakota"
North"Carolina"
Indiana"
Utah"
Mississippi"
Alabama"
Illinois"
Florida"
Virginia"
Texas"(Statewide)"
Nebraska"
Missouri"
Arizona"
South"Carolina"
Georgia"
Nevada"
District"of"Columbia"
Kansas"
Colorado"
Minnesota"
US"AVERAGE"
Iowa"
Ohio"
New"Mexico"
Maryland"
Pennsylvania"
Delaware"
Wisconsin"
Michigan"
Maine"
New"Jersey"
New"Hampshire"
Massachuse[s"
Vermont"
California"
Rhode"Island"
New"York"
Conneccut"
Alaska"
Hawaii"
CENTS&PE&R&KWH&
RESIDENTIAL&RETAIL&ELECTRICITY&PRICES"
All#Data#from#August#2014#
Na2onal&Average&
Sources: PowerToChoose.org offers as of August 1, 2014

12. 12
Electric prices remain a great deal
compared with other products
Price Change: December 2001 to September 2014 (Latest Available)
Gallon
of
Gas
201%
Dozen
Eggs
113%
Ground
Beef
94%
Ground
Coffee
79%
U.S.
Average
Residen)al
Electricity
57%
Hourly
Legal
Services
56%
Loaf
of
White
Bread
40%
Houston-­‐Galveston-­‐Brazoria
Rent
39%
Dallas-­‐Fort
Worth
Rent
26%
Gallon
of
Milk
21%
ERCOT
Average
Lowest
Fixed
Price
Offer
-­‐18%
ERCOT
Average
Lowest
Available
Offer
-­‐37%
Sources: Public Utility Commission of Texas (ERCOT electricity data 2001), U.S. Energy Information Administration (U.S. Average Electricity
Prices), Power to Choose (Competitive Prices) Bureau of Labor Statistics (All other statistics; data from December 2001 to September 2014
[latest available])

13. 13
Continued Transmission and Distribution
Investment Needed Throughout Texas
• According to the Texas State Data
Center, 10 million new residents
are expected in Texas by 2040.
• Though not shown here, areas of
Texas located outside the ERCOT
grid are also growing, both in
terms of population and
economic development.
• In the last two years, utilities
completed more than $4.0 billion
in transmission projects.
• The need for new and updated
transmission and distribution
infrastructure to meet population
and demand growth will require
continued investment.
Source: ERCOT, “Report on Existing and Potential Electric System
Constraints and Needs,” January 2012 (map) and December 2013 (text)

14. 14
Transmission & distribution: Maintaining &
modernizing reliable grid infrastructure
• The ERCOT market has substantially advanced over the last 15 years.
• As of November 2014, TDUs in ERCOT have rolled out advanced metering systems
(AMS) to over 6 million customers. AMS improves grid reliability through remote
reading and the ability to better determine where power needs to be restored
following an outage event, such as a storm. It also makes switching to a new REP
easier while enabling innovative pricing plans, such as night and weekend rates,
when electricity demand on the grid is lower.
• Operational Benefits:
• Improved outage response through automatic notification of customer outage
• Enhanced ability to reroute power around an outage, thus improving restoration
time and minimizing the number of customers affected
• Reduced vehicle emissions by eliminating need to send crews to execute such
routine orders as turning electric service on and off
• Automated meter reading
• Remote connect and disconnect

15. 15
The modernized electric grid

16. 16
Modernizing the grid requires
innovative rate mechanisms
• The electric industry is changing, with electric competition, customer engagement
models and efforts to promote energy conservation and environmental stewardship
affecting the way customers use and receive electricity.
• Regulatory regimes that can timely adapt to the changing market and better align
stakeholder interests will succeed in promoting economic growth, innovation,
efficiency and investment.
• Many jurisdictions have adopted alternatives to the traditional rate case process to
achieve these goals.
• These innovative rate mechanisms provide significant benefits to regulators, utilities
and their customers.

17. 17
Reliability activities outside ERCOT
• Market participants
located outside the
ERCOT grid work with the
FERC and several
regional utility-reliability
councils—or “power
pools” of interconnected
suppliers—to ensure the
reliability of their power
grids.
• For reliability purposes,
the non-ERCOT power
pools are electrically
interconnected with the
nation’s larger grids, but
in emergencies they can
electrically isolate
themselves.

18. 18
Electric generation: Meeting the needs of a
growing state
• The passage of wholesale electric competition in 1995 and retail electric competition
in 1999 helped spur the construction of dozens of new power plants, providing Texas
with a reliable source of power.
• Given the ongoing economic growth in the state, reliable generation needs to be in
place to continue to attract new businesses and industries.
• In recent years, the state’s electric reserves have fallen as loads have grown
and wholesale prices have remained unsustainably low, though relatively mild
summers in recent years have helped to avoid reliability concerns in the
absence of new generation.
• However, before a summer as hot as 2011 returns, generation investment will
be needed to maintain the level of reliability that Texans have come to expect as
the Texas population and economy grows.
• Texas remains a leader in low emissions rates, producing less NOx, SO2 and CO2 per
MWh of electricity than the national average.

19. 19
Fuels used for electricity in ERCOT
compared with U.S. average
Capacity (MW) Energy (MWh)
ERCOT U.S. Average
Nuclear
Nuclear
Wind
10%
12%
6%
13%
Other
1%
Hydro
Non-Hydro Renewables
(Mostly Wind)
Other (Mostly Petroleum)
Note: 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.
Sources: ERCOT (2013 data for energy; 2014 data for capacity); EIA (2013 data for energy, 2012 data for capacity)
Natural Gas
Coal
Non-Hydro Renewables
(Mostly Wind)
Hydro
27%
39%
19%
7%
1%
Coal
Natural Gas
Other
41%
37%
1%
Coal
Natural Gas
Nuclear
Wind
23% 56%
Other (Mostly Petroleum)
6%
Nuclear Natural Gas
Coal
42%
29%
9%
7%
5%
7%

20. 20
ERCOT summer resources and firm load
forecast: 2015-2024
Source: ERCOT, 2015 Report on the Capacity, Demand and Reserves in the ERCOT Region, December 2014

21. 21
Texas remains among nationwide leaders
in low emissions rates
States With NOx, SO2 and CO2 Emissions Rates Below the
National Average for Electric Generation
Source: EPA Air Markets Program Data (2013, Preliminary Data)

22. 22
Water usage In the average household
• Dependable water supplies are essential to
the reliable generation of electricity, so
electric generators are among the largest
owners, builders, and operators of private
reservoirs in Texas.
• Electric generators are very efficient in terms
of the water, consuming less than or equal to
4 percent of Texas’ total water demand.
• In addition, only about 3 percent of average
total household water use is attributable to
the generation of electricity used for the
home.
Source: Viability and Impacts of Implementing Various Power
Plant Cooling Technologies in Texas, prepared for EPRI by Texas
A&M University, July 2012
Bathing
Other
Household
Uses
Flushing
Toilets
Washing Clothes
Washing
Dishes
Electric Production
Drinking Water

23. 23
Key takeaways
1. Over the past 15 years, the competitive electric market has grown and met
customers’ needs in ways never imagined.
2. To build their businesses, REPs compete for customers in ERCOT, finding new and
innovative ways to differentiate themselves.
3. Maintaining a reliable grid depends on ensuring we have the investment needed to
build and maintain the poles and wires to deliver electricity from power plant to
customer.
4. While Texas has added significant generation to its fleet over the past 15 years,
reliable generation needs to be in place to continue to attract new businesses and
industries.
5. Over the years, Texas’ electric generators have used new technologies to lower the
emissions rates of NOx, SO2 and CO2.
6. By welcoming all types of technology — including emerging technologies such as
energy storage and renewable generation — the Texas electric industry is continuing
its role of providing reliable, affordable, and environmentally sustainable electricity.

24. 24
Web: AECT.net
Twitter: twitter.com/AECTnet
Facebook: AECT Advocacy
Email: info@aect.net