Summer 2012 Update on the Electric Industry in Texas

Update on the Electric Industry in Texas:

Summer 2012 Recap !

Legislative Staff Briefing!September 20, 2012!

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

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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.

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U.S. Divided into Eight!Reliability Regions!

•  Electric systems in Texas are located within four separate reliability regions: - Texas Reliability 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).

•  The eight reliability regions in the continental U.S. are subject to the oversight and enforcement authority of 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.

FERC

NERC

(ERCOT)

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AECT Companies!Within ERCOT!

Transmission and Distribution Utilities

Retail Electric Providers

Generation Companies

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AECT Companies!Outside of ERCOT!

Western Electricity Coordinating Council (WECC)

Southwest Power Pool (SPP)

SERC Reliability Corporation

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Summer 2012:!ERCOT Reliability Update and !

Resource Adequacy !

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Peak Demand in Texas on the !Upswing!

284,954

289,113

299,227

305,715 307,064

312,401

308,278

319,097

335,000

60,095

58,531

60,274

62,339 62,188 62,174

63,400

65,776

68,379

52,000

54,000

56,000

58,000

60,000

62,000

64,000

66,000

68,000

70,000

250,000

260,000

270,000

280,000

290,000

300,000

310,000

320,000

330,000

340,000

2003 2004 2005 2006 2007 2008 2009 2010 2011

MW

GWh

Year

Annual Energy and Peak Demand Annual Energy Peak Demand

Source: ERCOT presentation at AECT legislative staff briefing, May 17, 2012

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2013 2014 2015 2016 2017 2018 2019 2020 2021 2022Coal Projects under FIS 0 0 0 0 0 850 850 850 850 850Natural Gas Projects under FIS 89 1133 1733 1744 1744 1744 1744 1744 1744 1744Other Fuel Projects under FIS 316 316 316 316 316 316 316 316 316 316Solar Projects under FIS 260 441 481 481 481 481 481 481 481 481Wind Projects under FIS 379 1005 1196 1227 1227 1227 1227 1227 1227 1227MW under Interconnection Agreements 1106 1157 2664 4824 5484 6724 6724 6724 6724 6724MW Currently Installed Resources 73914 73933 73959 73933 74224 74160 73315 73315 73315 73315Forecast 65649 68403 71692 73957 75360 76483 76769 78524 79682 80694Forecast + Reserve 74676 77808 81550 84126 85722 86999 87324 89321 90638 91790

Mid-Term Projections

65,000

70,000

75,000

80,000

85,000

90,000

95,000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

MW.Currently.Installed.Resources MW.under.Interconnection.Agreements Coal.Projects.under.FIS

Natural.Gas.Projects.under.FIS Other.Fuel.Projects.under.FIS Solar.Projects.under.FIS

Wind.Projects.under.FIS Forecast Forecast.+.Reserve

*.FIS.=.Full.Interconnection.Studies

•  ERCOT reported sufficient capacity for Summer 2012, but concerns over the next several years.

•  CSAPR stay also impacted forecasts.

Resource Adequacy Concerns!Over the Next Several Years!

Source: ERCOT Capacity, Demand and Reserves Report, May 22, 2012

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ERCOT and PUC Outreach on Need to Conserve!

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Additional Resources on Energy Efficiency and Conservation!

•  Customers in the ERCOT competitive retail electric market can contact their retail electric provider or visit www.powertochoose.org to learn more about available options.

•  All customers can contact their electric company 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 Services Commission's information and referral network, to learn about programs available in the area.

•  Additional resources –  Texas Department of Housing and Community Affairs:

www.tdhca.state.tx.us/assist_repair.htm –  U.S. Department of Energy: www.energy.gov/energyefficiency –  Get Energy Active: www.getenergyactive.org

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Summer 2012 Has Again!Been Warmer Than Average!

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High Temperature

Summer Temperature Comparison (Austin) - Historical Average vs. 2012

Average 2012

July

June

Aug

Source: Weather Underground

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But With Few Exceptions Summer 2012!Has Been Cooler Than Summer 2011!

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High Temperature

Summer Temperature Comparison (Austin) - 2011 vs. 2012

2011 2012

July

June

Aug

Source: Weather Underground

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•  “While it is always possible for unique conditions (such as much higher than expected peak demands or higher than normal forced generation outages) to occur that would require ERCOT to declare an Energy Emergency Alert (EEA), ERCOT does not anticipate calling for rotating outages.”

ERCOT Fall Forecast Shows Sufficient Capacity!

Total Resources 74,516 MW Includes installed capacity, capacity from private networks, other sources and adjustments for effective capacity of wind

Total Forecasted Peak Demand 53,227 MW Calculated based on data from the Climate Prediction

Center

Reserve Capacity 21,289 MW Resources minus Peak Demand

Range of Risks 8,601-17,998 MW Includes power plant maintenance and unexpected plant outages

Range of Reserve Capacity Beyond Risks 3,291-12,688 MW Reserve capacity minus risk

Source: ERCOT Seasonable Assessment of Resource Adequacy, September 9, 2012

ERCOT Seasonable Assessment of Resource Adequacy

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•  On June 28, 2012, the PUC voted to increase the system-wide energy offer cap.

•  While there were concerns that retail prices would be adversely affected, offer prices available in the competitive market have remained steady over the past seven weeks.

–  From August 1 to September 17, the average 12-month fixed price offer fell from 10.1¢/kWh to 10.0¢/kWh.

–  The average lowest-available offer fell from 8.1¢/kWh to 6.9¢/kWh.

PUC Activity on Resource Adequacy!

Power market lurches along, with peril dead ahead

July 1, 2012

Higher electric costs not justified June 28, 2012

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•  Open Meetings and Workshops on Resource Adequacy Projects: June 13 and 28; July 13 and 30; August 8 and 17; September 6, 13 and upcoming on September 28

•  Brattle Report: Released June 1, provided analysis of five key scenarios for consideration

•  System-Wide Offer Cap: Raised by PUC and implemented by ERCOT on August 1

•  Power Balance Penalty Curve: Studied and adjustments considered by PUC

•  Demand Response and Load-Management Initiatives: Bolstered by ERCOT

•  Compensation for Reliability Unit Commitments: Addressed by ERCOT

Summertime PUC and ERCOT Activity !on Resource Adequacy!

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•  The Brattle Group was asked to analyze ERCOT’s options for increasing its ability to attract electric generation and bolster its reserve margin. It developed five key concepts, forming the basis of discussion on the issue.

–  Option 1: Current energy-only market

–  Option 2: Energy-only market with adders to support a target reserve margin

–  Option 3: Energy-only market with a backstop procurement requirement to meet minimum accepted reliability

–  Option 4: Market in which load-serving entities contract for capacity to meet a resource adequacy requirement

–  Option 5: Capacity market to meet a resource adequacy requirement

Resource Adequacy Options from!The Brattle Group!

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Advanced Meter Deployments,!New REP Products and!

Current Prices Available in the Market!

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Benefits of Advanced Metering

•  Advanced meters and other new technologies and associated infrastructure will provide information and opportunities that will enable customers to better understand the impact of controlling their energy consumption.

•  By controlling their energy consumption, customers can better manage their bills and lessen their environmental impact.

•  Advanced meters will allow for more automation of utility functions such as meter reading and connections/disconnections, which help to reduce costs.

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Advanced Metering Activities in Texas

•  The approved deployment plan for CenterPoint Energy calls for installation of advanced meters over five years beginning in March 2009. In 2009, CenterPoint Energy received a Federal Smart Grid Investment Grant that enabled the deployment to be completed in 2012. CenterPoint completed installation of approximately 2.2 million meters throughout its service territory in mid-2012.

•  Oncor’s approved deployment plan initiated in late 2008 will have installation of advanced meters completed by the end of 2012. As of August 31, 2012, Oncor has installed over 3 million meters.

•  The AEP Texas deployment plan was approved in December 2009 and installation of advanced meters will be completed by the end of 2013. Over 600,000 meters have been installed as of August 31, 2012.

•  TNMP began installation of advanced meters in September 2011. As of August 31, 2012, over 57 thousand have been installed.

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Advanced Meters Have been!Proven to be Accurate, Safe and Reliable

•  Accuracy: Advanced meters are rigorously tested and must be independently certified to prove their measurements are accurate. In fact, repeated tests confirm that advanced meters are often more accurate than analog meters.

•  Beneficial: Increased reliability, restoration after a power outage, remote meter reading are among the immediate cost-savings for advanced meters.

•  Secure: Advanced meters are a technological leap, much like cell phones and other evolving industries. Utilities use advanced encryption technology to safeguard consumer data.

•  Safe: Digital meter radio frequency (RF) emissions are well below FCC standards and are minimal compared to the RF emissions of many commonly used household devices. The extensive scientific literature reflects that there is no credible evidence of negative health impacts from the low level of RF emissions from digital meters.

•  Private: Utilities adhere to strict policies, following Texas laws that regulate the use of personal information for business functions like billing and customer service.

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Smart Meters in Action:!Reliant e-Sense Plans and Products!

•  Keep Your Cash Nights & Weekends plan - All electricity used on weeknights from 8 p.m. and 8 a.m. and all weekend long is discounted.

•  Time-of-Use plan -- Customers receive a lower price during off-peak hours. Higher-priced Summer Peak hours are only 3% of the total hours in the year. By minimizing usage in this period, a customer can maximize savings.

•  Reliant’s Learn & Conserve PlanSM featuring the Nest Learning ThermostatTM – Nest learns customer preferences and even adjusts itself when the customer is away, or allows remote adjustment via mobile app, so electricity isn’t wasted cooling an empty home.

•  Degrees of Difference – participants receive optional requests to conserve when high electricity demand is anticipated; customers who use less during the requested conservation hours receive a credit on their next electricity bill.

•  Reliant also offers information between monthly bills, via home energy monitor, weekly summary e-mail, text alerts, and mobile app

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•  TXU Energy Free Nights plan -  Customers pay nothing for Energy Charges at night (10 pm – 6 am). -  Customers receive ~25% of their Energy Charges for free1

-  Guaranteed price protection for a full 12, 18 or 24 months

•  TXU Energy MyEnergy DashboardSM

-  A web-based information service that helps customers better understand how and when they use electricity so they can reduce usage and save money on electricity bills

-  A free service available to all TXU Energy customers

•  Brighten® iThermostat -  A touch-screen programmable thermostat that helps customers

monitor and manage their home's temperature via the Internet -  Customers also participate in the Brighten® Conservation Program,

which allows air conditioner cycling during high demand periods

Smart Meters in Action:!TXU Energy’s Innovative Plans & Products!

1 Estimated savings based on average Texas household’s annual electricity usage between 10 p.m. and 6 a.m.. Results will vary depending on actual usage.

•  A sampling of other TXU Energy programs and services: -  Personalized electricity usage reports and budget alerts -  Personal energy advisor for energy-saving tools, tips, and projects -  Account access and compare bills/usage through iPhone or Android apps

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Service Area 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

10.6¢/kWh 9.4¢/kWh 7.4¢/kWh 9.6¢/kWh 12.2¢/kWh

AEP Texas North


CenterPoint Energy


Oncor


TNMP


Price Offers Remain Low in the ERCOT Competitive Market

Sources: PUC Historical Data, Bureau of Labor and Statistics, www.powertochoose.org offers as of September 17, 2012

September 2012 December 2001

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Environmental Update!

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Other Factors: !Federal Environmental Regulation!

•  On August 21, a federal court vacated the Cross-State Air Pollution Rule (CSAPR), which would have required generation units to significantly reduce emissions on a short time frame.

-  CSAPR would have impacted the ability of many coal-fired generation units in Texas to operate, creating additional resource adequacy concerns.

•  On September 13, a federal court agreed to hold in abeyance challenges to the EPA's Mercury and Air Toxics (MATS) standards while the agency reconsiders parts of the rulemaking.

•  Meanwhile, as subsequent slides show, Texas generators perform well in comparison with the nation as a whole.

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Texas’ Electric Generating Plants Among Cleanest NOx Emitters in the Nation!

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b/

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Texas has the 12th cleanest average

NOx emissions rate

U.S. Average Outside Texas

0.161 lb/mmBtu

Source: 2011 EPA Air Markets Program Database, Acid Rain Program Only

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Texas’ Electric Generating Plants Among Cleanest SO2 Emitters in the Nation!

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Source: 2011 EPA Air Markets Program Database, Acid Rain Program Only

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Web: AECT.net Blog: AECTnet.wordpress.com

Twitter: @AECTnet Facebook: AECT Advocacy Email: [email protected]

Summer 2012 Update on the Electric Industry in Texas

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