March 2018/Page 1

Whats Inside:

March 2018

Washington Report Public Power: A Rich History 3Regulatory Update LP&L Move to ERCOT Approved 4 Commissioner Marquez Resigns 5 Sempra/Oncor Deal Approved 5TPPA Annual Meeting Agenda 10 Registration Form 11

TPPA CalendarTPPA Annual MeetingJuly 23-25, 2018Four SeasonsAustin, TX

TPPA’s New Address :

Mailing Address:PO Box 82768Austin, TX 78708TPPA’s Physical Address :701 Brazos, Suite 495Austin, TX 78701

PH - 512-472-5965FAX - 512-472-5967www.tppa.com

ERCOT Predicts Record-Breaking

Peak Power Demand This Summer

The Electric Reliability Council of Texason March 1 said that it is predicting record-breaking peak power usage this summer,which it said will be driven by the state’sstrong economy.

ERCOT, the grid operator for most ofTexas, also expects the recent retirement ofolder generating units to result in tightoperating reserves.

ERCOT released its final SeasonalAssessment of Resource Adequacy reportfor the upcoming spring season (March –May) and its preliminary assessment for thesummer season (June – September).

“The ERCOT market has experienced aseries of new peak demand records over thelast few years as Texas’ economy continuesto grow at record pace,” Bill Magness,ERCOT President and CEO said. “We expecthigh peak demand will continue this summer.”

The ERCOT wholesale market providesstrong financial incentives for generators tobe available when demand rises, and for retailelectric providers to prepare for pricefluctuations, the grid operator said in a newsrelease.

ERCOT also anticipates voluntary loadreductions and an increase in power sold in

the market by industrial facilities inresponse to higher power prices duringpeak demand.

Total resource capacity for theupcoming summer is expected to be 77,658MW. The preliminary summer SeasonalAssessment of Resource Adequacy reportincludes a 72,974 MW summer peak loadforecast based on normal weather condi-tions for 2002-2016. This forecast is higherthan the all-time summer peak demandrecord of 71,110 MW set on Aug. 11, 2016.

Almost 3,800 MW in new generationresources began operating in 2017, andmore than 14,000 MW of resources areplanned to be in service by 2020.

The final summer Seasonal Assess-ment of Resource Adequacy report will bereleased in May and will reflect theexpected summer weather conditions.

ERCOT on March 1 also released thefinal SARA report for spring. At this time,ERCOT anticipates there will be sufficientgeneration to meet system-wide demandunder a range of extreme system condi-tions. The adjusted spring peak loadforecast is expected 59,477 MW.

TPPA 2018 Annual Meeting in Austin

The TPPA Annual Meeting will be heldon July 23-25, 2018 at the Four Seasons inAustin.

Early Registration for this meeting is$400 for TPPA Members if registration isreceived by June 15th, after that date theregistration will be $500 for TPPA Members.There is a seperate fee for golf along withspouses attending the receptions as a guest.

Hotel resevations should be madedirectly with the Four Seasons by calling 512-685-6100 and asking for the TPPA Annual

Meeting rate. The hotel cut-off date is alsoJune 15th. Make your reservation beforethis date in order to guarantee a room.

The TPPA website also has informa-tion about the TPPA Awards that will bepresented during the TPPA GeneralMembership Meeting & Awards Ceremonyon Wednesday, July 25th. Please considersubmitting nominations for these awards.

The registration and agenda can befound on pages 10-11 of this newsletter.

Texas Public Power AssociationPO Box 82768Austin, Texas 78708Phone (512) 472-5965Fax (512) 472-5967www.tppa.com

BOARD OF DIRECTORS

PresidentSharon Hayes (Weatherford)

President-ElectKean Register (Bryan)

Vice-PresidentKent Myers (Fredericksburg)

Secretary/TreasurerShawn Raborn (La Grange)

Past PresidentBob Kahn (TMPA)

Ron Bowman (Boerne), Jim Briggs (Georgetown), Gary Brown(WTMPA), John Bruciak (Brownsville PUB), Doug Faseler(Seguin), Paula Gold-Williams (CPS Energy), Jeff Janke(Garland), David McCalla (Lubbock P&L), Lowell Ogle(Brenham), Alicia Price (GEUS), Jackie Sargent (Austin Energy),Ian Taylor (New Braunfels Utilities), Phil Wilson (LCRA) andMike Wittler (KPUB).

STAFFExecutive DirectorWalt Baum

Operations ManagerDebra L. Scarbo

Regulatory ManagerWendell Bell

Office ManagerJosie Caballero

MEMBERS

Cities: Austin, Bartlett, Bastrop, Bellville, Boerne, Bowie, Brady,Brenham, Bridgeport, Brownfield, Brownsville, Bryan, Burnet,Caldwell, Castroville, Coleman, College Station, Cuero, Denton,Electra, Farmersville, Flatonia, Floresville, Floydada,Fredericksburg, Garland, Georgetown, Giddings, Goldsmith,Goldthwaite, Gonzales, Granbury, Greenville, Hallettsville,Hemphill, Hempstead, Kerrville, Kirbyville, LaGrange,Lampasas, Lexington, Liberty, Livingston, Llano, Lockhart,Lubbock, Luling, Mason, Moulton, New Braunfels, Newton,Robstown, San Antonio, San Augustine, San Marcos, SanSaba, Sanger, Schulenburg, Seguin, Seymour, Shiner,Smithville, Timpson, Tulia, Waelder, Weatherford, Weimar,Whitesboro, YoakumJoint Action Agencies: Texas Municipal Power Agency, WestTexas Municipal Power AgencyRiver Authorities: Lower Colorado River AuthorityElectric Cooperatives: Bluebonnet, Central Texas, Fayette,Guadalupe Valley, Texas Electric Cooperatives

March 2018/Page 2

We recently returned from visiting Washington D.C. to participate in the AmericanPublic Power Association’s (APPA) Legislative Rally. This rally is one of the best ways thatpublic power officials can communicate our federal legislative priorities with our Senatorsand Congressmen. The rally is also an excellent opportunity to get updates on federallegislative and regulatory issues from APPA staff and learn about issues facing other publicpower systems across the country.

Texas was well represented this year. Our delegation consisted of Mayors, CityManagers, General Managers, Board members and other leaders from Austin Energy, BPUB,Bryan, CPS Energy, Garland, NBU, Seguin and TMPA.

We spent plenty of time walking the halls of the House and Senate office buildings tomeet with our Congressional delegation. The House and Senate are both in Session so itwas a busy time to be moving around the Capitol complex. We met with Congressmen BillFlores, Lamar Smith, Pete Sessions, Randy Weber and with staff from Congressmen MikeConaway, Lloyd Doggett, Vincente Gonzalez, Joaquin Castro, and Kenny Marchant’s office.One of the great things about these visits is to see how many of our attendees were wellknown by the congressional offices as they deal with them often back in their districts.While in these meetings, we shared our positions on these federal issues:

PRESERVING FEDERAL POLE ATTACHMENT RULES: TPPA opposes any efforts toremove or drastically change the exemption for public power utilities from federal poleattachment regulations. The Texas Legislative recently passed a bill concerning poleattachments that recognized that MOUs need to manage and set standards for attachmentson their utility systems.

MUNICIPAL BONDS: We spent most of 2017 working our members in Congress topreserve the current tax-free status of municipal bonds as part of the Tax reform package.We made sure on this trip to thank the Texas Delegation for their work which helped ensurethat the tax exclusion for municipal bond interest was preserved. Unfortunately, Congressreduced this critical tool’s flexibility by prohibiting the issuance of tax-exempt advancerefunding bonds. We did ask our members to support a bill that has been filed to re-instateour ability to do advanced refunding since that is a tool used to save money and pass alongthose savings to the communities we serve.

DRONES: Drones are a particularly cost-effective and safe way for electric utilities toassess storm damage, survey distribution and transmission equipment, and supportconstruction and repair. Some TPPA utilities already deploy drones in routine surveys ofelectric power equipment and support of construction and repair, and others are investigat-ing how to use drones. However, FAA regulations have not kept pace with this evolvingtechnology and, in many cases, do not enable utility users to unleash the potential thatdrones offer to improve the efficiency and effectiveness of infrastructure inspection anddisaster recovery efforts. We talked with our delegation about ways to update FAA regula-tions to allow us to better use this technology.

GRID SECURITY - CYBER AND PHYSICAL: Providing a safe, reliable, and securesupply of electricity is the top priority for public power systems in Texas and the rest of theelectric utility industry. Our members of Congress are always very interested in hearingabout the role TPPA members play in grid security and information sharing on both cyberand physical security threats.

Thanks to everyone who attended the rally to help tell our story. People in WashingtonD.C. like to talk a lot about job creation. We actually brought job creators to D.C. in the formof Texas public power leaders who drive economic development in the communities weserve.

Best Regards,

Walt Baum

March 2018/Page 3

CALENDAR

Public Power: A Rich History, A Bright Future

continued on pg. 6

By Delia Patterson, APPAThe public power business model —

also known as municipal ownership — is anAmerican tradition rooted in community. Inplace since the 1880s, the model is simple:distribute electricity to local customers on anot-for-profit basis. The focus is oncustomers. Rates are cost-based. Service isreliable. Dollars spent on electricity stay inthe community and are re-invested there.Customers are the owners and — throughelected or appointed governing boards orcity councils — the decision makers fortheir utilities. Where economies of scale arehelpful for meeting energy needs, publicpower utilities form joint action agenciesserving a single state or region.

Today, public power — locally ownedand controlled electricity service — is asrelevant and valuable as it was over 100years ago. Public power utilities havesurvived frequently unfavorable politicaland economic environments. Municipalutilities established in the 19th and 20th

centuries still stand today as continuingtestament to the value of public power.

Public power utilities are deeply rootedin the history of the United States. They arean expression of the American ideal of localpeople working together to meet localneeds. Like schools, parks, libraries, police,and fire protection, public power utilities arepart of local government. They are gov-erned locally and operated to provide anessential public service at a reasonableprice.

Several factors led to the establishmentof public power utilities. In some communi-ties it was simply a practical decision madeby community leaders who wanted toimprove the quality of their citizens’ lives. Inthe early days of the electricity industry,smaller communities were not attractive toprivate electricity companies. When theprivate sector failed to meet their needs,these communities took matters into theirown hands.

The first public power utility was born

on the evening of March 31, 1880, in the farmcommunity of Wabash, Indiana. Shortly after8 pm that evening, mechanics hitched athreshing machine engine to the west wall ofthe Wabash County Courthouse and sentmotive power to a generator in the basement.Within minutes, lights atop the courthousebathed downtown Wabash in brilliant light.

One eyewitness account described thescene in Wabash that night as follows:

People stood overwhelmed with awe, asif in the presence of the supernatural. Thestrange, weird, light, exceeded in power onlyby the sun, rendered the square as light asmidday. Men fell on their knees, groans wereuttered at the sight and many were dumbwith amazement. We contemplated the newwonder in science as lightning broughtdown from the heavens.

(Museum of Electricity, Brush ArcLamps, Wabash, Ind. 1880, citing an excerptfrom a newspaper account in Men and

March 2018/Page 4

continued on pg. 5

Lubbock Move to

ERCOT Approved

On March 8th, the Public Utility Commis-sion (PUC) approved the entry of LubbockPower & Light (LP&L) to the ElectricReliability Council of Texas (ERCOT).

“Joining our fellow Texans as part ofthe ERCOT system accomplishes the long-term goals we set forth when we began thisprocess over three years ago. It providesour customers a diversified portfolio ofreliable and affordable Texas power forgenerations to come,” said LP&L DirectorDavid McCalla. “Moving to ERCOTconstitutes an important milestone for ourutility and we appreciate the diligenceshown by the commissioners throughoutthis process.”

LP&L submitted its application tointegrate approximately 70 percent of itssystem into ERCOT on September 1, 2017and in January the PUC conducted aHearing on the Merits to deliberate onwhether Lubbock’s integration was in the

public interest of all Texas ratepayers. Finalapproval by the commissioners allowsLubbock to begin the next phase of theprocess which will include the approval andconstruction of transmission facilities inorder to connect Lubbock to the ERCOT gridby June 1, 2021.

Lubbock Mayor Dan Pope said, “This isan important day for the City of Lubbock. Weare securing our future energy needs for ourratepayers and putting our community in aposition to continue its economic vitality foryears to come. Joining the ERCOT marketmeans partnering with our fellow Texans inone of the most competitive electric marketsin the country. I am excited for the benefitsthat will be seen by our citizens as a result ofthe hard work of leadership at LP&L and lookforward to moving our citizens closer to theretail competitive environment.”

The transition by Lubbock’s municipalelectric utility puts the city on the bestpossible path forward saving its ratepayersmoney and opening the door to retail electriccompetition in Lubbock. Based on third-partystudies, the anticipated annual savings

achieved by moving the majority of LP&L’ssystem to ERCOT exceeds any stipulatedagreements reached between LP&L andinterested parties.

Acknowledging that its integrationinto ERCOT will involve certain costs andother impacts on consumers in both powerregions, LP&L worked with affected partiesto come to a reasonable resolution of theseconcerns. Key elements of the agreementinclude the following:

· LP&L will pay $22 million each yearfor five years to ERCOT wholesale trans-mission customers;

· LP&L will pay $24 million to SPS tomitigate cost impacts to SPS’s retail andwholesale customers;

· LP&L intends to exercise its right toopt-in to retail competition for the affectedload as soon as practicable; and

· LP&L will pay the cost of ERCOTintegration studies conducted by ERCOT($81,562) and SPP ($172,479).

Further information on the full impactof Lubbock’s integration to the ERCOT

March 2018/Page 5

Regulatory Update

continued from pg. 4

market, including stipulated agreements byinterested parties in LP&L’s public interestcase and an independent cost/benefitanalysis, is located at LPandL.com/ERCOT.

Commissioner

Marquez Resigns

Commissioner Brandy Marty Marquezannounced at the PUC’s March 8th meetingthat she is resigning from the commission,effective April 2nd. Marquez’s term began onAugust 22, 2013 when she was appointed byGov. Rick Perry. In 2015, Gov. Greg Abbottreappointed her to a term that expires onSeptember 1, 2019. The March 29th PUCmeeting will be her last.

Sempra Acquisition

of Oncor Approved

The PUC has approved SempraEnergy’s $9.45 billion acquisition of Oncor,the state’s largest regulated utility. PUCapproval is a key element in the reorganiza-tion plan of Energy Future Holdings (EFH),which owns approximately 80 percent ofOncor. EFH filed for Chapter 11 protection inApril 2014.

Sempra and Oncor reached a settlementagreement in February with PUC staff andthe nine intervening parties, so the PUC wasable to cancel the hearing on the meritsscheduled to begin February 21. Parties tothe stipulation include Texas Legal ServicesCenter, the Office of Public Utility Counsel;Steering Committee of Cities Served byOncor, Texas Industrial Energy Consumers,Energy Freedom Coalition of America,Golden Spread Electric Cooperative, NucorSteel, the Alliance for Retail Markets, and theTexas Energy Association for Marketers.

Key concerns addressed by the partiesincluded commitments to preserve “ring

fence” provisions insuring the indepen-dence of the Oncor board of directors andisolating Oncor finances from the parentcompany. In addition, most of Oncor’ssavings generated from the deal will goback to customers for the next few years.

By addressing issues important to theintervenors, Sempra succeeded where threeprevious attempts to acquire Oncor fellthrough. These include offers by BerkshireHathaway Inc., NextEra Energy Inc., and agroup backed by Hunt Consolidated Inc.

Oncor is the state’s largest transmis-sion and distribution utility with 134,000miles of power lines serving some 3.5million customers. San Diego based Sempraowns electric and gas utilities in SouthernCalifornia, Chile, and Peru that collectivelyserve more than 32 million consumers.

March 2018/Page 6

Washington Update

continued from pg. 3

continued on pg. 7

Volts: The Story of General Electric). The Wabash City Council’s decision to

own its electric lighting system instead offranchising the new utility to a privatecompany created America’s first municipalutility. Wabash later relinquished the title ofAmerica’s oldest public power community toButler, Missouri, when it sold its electricutility to a private company. But Wabashcreated a model in 1880 that would beadopted by thousands of American communi-ties since, a model that still thrives.

Butler prides itself on being known as“electric city” because it was the first citywest of the Mississippi to have electricpower. It is also the oldest continuouslyoperated public power utility in the UnitedStates, running since 1881.

Early in the 20th century, public powerutilities were being formed at a rapid pace.The golden days of public power came in theearly 1920s when more than 3,000 municipalsystems were in operation, according to

David Schap in Municipal Ownership inthe Electric Utility Industry: A CentennialView. Public power utilities were becominga real threat to private electricity compa-nies.

Then, the number of public powerutilities shrank under the pressure of anaggressive private industry and rapidlychanging technology. By 1930, the numberof public power utilities fell to approxi-mately 1,900, according to Schap.

In the early 1930s, this downwardspiral was reversed, and by the end of thedecade there were approximately 2,000community-owned and operated electricutilities. Several factors contributed to thissecond, more modest, wave of municipalownership. One was the development ofdiesel technology, which made small-scalemunicipal generation more efficient.Another factor was growing resentmentagainst private utilities, with excessiverates and absentee owners who exportedthe profits at the expense of the utilitysystems.

Increasingly, active federal involve-ment also played a major role. The

administration of Franklin D. Rooseveltcreated the Tennessee Valley Authority todevelop hydroelectric power. In his famous“Portland Speech,” on September 21, 1932,Roosevelt said that inexpensive publicpower would serve as a “yardstick” againstwhich to judge private utilities’ rates andservice. “The very fact that a communitycan, by vote of the electorate, create ayardstick of its own, will, in most cases,guarantee good service and low rates to itspopulation,” he said. “I might call the rightof people to own and operate their ownutility something like this: a ‘birch rod’ inthe cupboard to be taken out and used onlywhen the ‘child’ gets beyond the pointwhere a mere scolding does no good.”

Public power utilities in the 21stcentury still are an integral part of thenation’s electric utility infrastructure. Theyhave capitalized on new techniques andtechnologies to provide low-cost, superiorservice to their communities and citizens.Public power systems have consistentlyserved as a benchmark, or yardstick, bywhich the performance of other utilities

March 2018/Page 7

Washington Report

continued from pg. 6have been measured.

Notwithstanding public power’s many successes to date,“munis” must continue to adapt and change with the times. At thesame time, they must not forsake traditional values. They must makethe most of their unique characteristics to enhance their competitiveposition in an ever-changing market. Through the ongoing efforts ofdedicated public power boards and city councils, employees, citizenowners, and advocates, public power utilities must continue to leadthe industry by acting in the best interests of their customers andreflecting the needs of the communities they serve.

Public power has the potential to remain the strong competitiveforce that provides a “yardstick” for customers and regulators tomeasure the performance and rates of private electric companies fordecades to come. This continued competition benefits all electriccustomers, not just those served by public power.

March 2018/Page 8

IRS Issues Ruling on Storage Plus Solar and ITC Eligibility

continued on pg. 9

Energy storage devices added toexisting residential solar equipment areeligible for a 30 percent federal investmenttax credit if the storage system is solelycharged from the photovoltaic panels, theInternal Revenue Service said in a privateletter ruling.

The ITC allows residential customers todeduct 30 percent of their costs for installingsolar and energy storage equipment fromtheir federal income taxes. The private letterruling was released March 2 and is not thefirst time the IRS has ruled on the applicabil-ity of the tax credit to storage and solar.

“It’s a big day for the residential solar[combined with] storage industry,” saidJason Burwen, Energy Storage Associationvice president for policy.

The finding that an energy storageretrofit of a residential solar PV project iseligible for the ITC under Internal RevenueCode Section 25D is a step in the rightdirection toward a common-sense taxapproach to storage, the ESA said in astatement.

“Reducing barriers for taxpayers is animportant action this administration can taketo continue growing this industry and tocreate thousands of new jobs,” the ESAsaid.

The IRS letter was written to anunidentified taxpayer who had alreadyinstalled rooftop solar and wanted to know ifthey could receive the ITC tax credit foradding battery storage. The IRS responseonly applies to the situation described bythe homeowner.

“The battery is considered to beproperty which uses solar energy togenerate electricity for use in your dwellingunit located in the United States and used asa residence by you,” the IRS said. “Thesoftware management tool portion is onlyconsidered part of the qualified solar electricproperty so long as it is required in monitor-ing the charging and discharging of solarenergy.”

The IRS said earlier installations ofqualifying property do not affect the

availability of the tax credit for qualifyingproperty in later years.

The IRS said all of the energy used bythe battery must be derived from the sun. “Ifthis is not the case, the battery does notmeet the definition of ‘qualified solar electricproperty’ in the code,” the IRS said, notingthat Congress specifically said solar hotwater heaters qualify for the credit if at leasthalf of the electricity comes from solarpanels.

The ESA cautioned that the privateletter ruling does not constitute formalguidance. “There is still significant uncer-tainty surrounding taxpayers’ ability toaccess the ITC, which could limit invest-ment and hamper industry growth,” thetrade group said.

The ESA said it is pressing Congress topass bipartisan legislation (S. 1868; H.R.464) that clarifies that energy storage iseligible for both the Section 48 and 25D ITCwhen paired with all energy technologies,

March 2018/Page 9

Mark your Calendars

TPPA

Annual Meeting

July 23-25, 2018

Four SeasonsAustin, TX

IRS Ruling

continued from pg. 8

including gas-fired power plants, windturbines and heating, ventilation and airconditioning systems.

The residential solar ITC is set to bephased out. It falls to 26 percent in 2020, 22percent in 2021 and then drops to zero. TheITC for commercial solar follows the samepath but declines to only 10 percent in 2020.

New report details storage growthMeanwhile, the energy storage market

appears poised for a breakout, according to areport released Tuesday by ESA and GTMResearch.

Last year, about 215 megawatts ofstorage was installed in the United Statescapable of delivering about 390 megawatthours, according to the report.

GTM expects about 550 MW of storageto be deployed this year and more than 1,000MW to be added in 2019. The consultingfirm expects annual installations to grow toabout 3,300 MW in 2023.

“Falling costs and favorable policies will

be among the core drivers of the market’sbreakout 2018,” Ravi Manghani, GTM’sdirector of energy storage, said. “It’s nothard to imagine that every solar RFP by theend of the year will include storage.”

The Federal Energy RegulatoryCommission’s decision last month to requireregional transmission organizations andindependent system operators to adoptrules that allow storage resources to be paidfor the various services they can provide tothe grid will boost the storage sector,according to ESA.

“Policies and regulatory frameworksthat level the playing field will furtherencourage energy storage deploymentthroughout 2018 and beyond as theindustry builds toward a goal of realizing[35,000 MW] by 2025,”said Kelly Speakes-Backman, ESA chief executive officer.

March 2018/Page 10

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Texas Public Power AssociationPO Box 82768Austin, Texas 78708

Mark your Calendars

TPPAAnnual Meeting

July 23-25, 2018

Four SeasonsAustin, TX

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