The document provides an update on environmental issues from December 2010. It discusses legislative principles for ensuring a reliable electricity supply while supporting environmental health. It then summarizes generation sources in Texas compared to national averages and the economic importance of coal. Updates are given on federal regulations including mercury limits, regional haze rules, and water intake structure requirements. In general, it outlines existing clean air progress in Texas while anticipating more stringent future federal standards.

1. Update on Environmental Issues
December 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. 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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3. ERCOT Generation Mix Compared
to U.S. Average
ERCOT U.S. Average
Other
Energy (MWh)
Wind Renewable Petroleum
7% 2% (Mostly Hydro) 1%
Natural Gas
Nuclear 9% 21%
Nuclear
15%
40% 20%
36%
Natural Gas 48%
Coal
Coal
Other
Wind Oil
3%
Renewable
10% (Mostly Hydro) 6%
Capacity (MW)
Nuclear Natural Gas
6% 14%
39%
16% Nuclear 10%
Coal
65%
31%
Natural Gas
Coal
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 (2009 summer data), EIA (2008 data, latest available) 3

4. The Use of Coal in Texas is Important
The total economic impact of coal mining and coal-fired electric generating plants
is estimated to be:
For Texas2: For East Texas2:
• $10.498 billion in annual Total Expenditures; • $3.635 billion in annual Total Expenditures;
• $3.516 billion in annual Gross Product; • $1.185 billion in annual Gross Product;
• $2.081 billion in annual Personal Income; • $0.741 billion in annual Personal Income;
• $0.584 billion in annual Retail Sales; and • $0.193 billion in annual Retail Sales; and
• 33,197 Permanent Jobs. • 11,195 Permanent Jobs.
1EIA, 4
State Electricity Profiles 2008; 2Perryman Report, 2004

5. Things are BIGGER in Texas
• Texas ranks #1 among the states for electricity generation
 80% above #2
• Texas ranks #1 among states for electricity consumption
 population, industry, weather
• Texas ranks #1 among states for coal consumption
• Texas ranks #6 among states for coal production
• Texas has the 11th largest economy in the world
• Texas ranks #1 among states for energy production
• Texas ranks #1 among states in each of - natural gas, oil and wind energy production.
• Texas ranks # 6 in the world in annual wind energy production
• Texas consumes 11.5% of U.S. energy production
• Texas ranks #1 among states for energy consumption & #2 $GSP
 Industry uses 50% of the energy consumed in Texas
• Texas’ population – currently 23.5 million — grew at more than double the national rate —
14.6 percent versus 7.2 percent between 2000 and 2007.
• Texas’ population will increase by more than 50 percent, growing to an estimated 35.8
million people, by 2040.
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Source: Comptroller of Public Accounts and The Fort Worth Star-Telegram June 11, 2009, and Texas Association of Business, 2/11/10

6. 6

7. Texas Is Already Leading the Way in
Clean Power Plants
Texas will always have the
largest emissions of any state
0.234
0.351 OK 0.198 since it produces ~80% more
NM AR power than the next ranked
state,
0.142
0.098 LA but Texas also has one of the
TX cleaner emission rates per
energy output.
2009 NOx Emission
Rate Averages (lbs/
Area mmBtu)
National 0.159
Texas 0.098
7
EPA Clean Air Markets Division – 2009 Acid Rain Program Data

8. EPA 2010 and Beyond
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9. 82nd Texas Legislature
January 11, 2011 – May 30, 2011
Texas Legislature’s Agency Sunset includes three of the environmental
agencies:
– Texas Commission on Environmental Quality (TCEQ)
– Texas Water Development Board (TWDB)
– Railroad Commission (RRC)
Expected influences on the 82nd Session:
– EPA Disapproval of TCEQ Air Permitting Program
– Maintenance, Start-up, and Shutdown Emissions (MSS) Permitting by
TCEQ
– Agency budget pressures
– Water supply
AECT’s primary goal during Texas legislative sessions and rulemakings is
to avoid new onerous regulation which is unnecessary, expensive, reduces
optionality, and limits operational flexibility. Initiatives are undertaken to
provide significant improvement in risk, cost, and operation.
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10. Texasʼ Electric Generating Plants Among
Cleanest NOx Emitters in the Nation
Texas has the 11th
cleanest average NOx
emissions rate.
NOx (lb/MMBtu)
U.S.
Average-0.159
lb/mmBtu
10
EPA Acid Rain Database, 2009

11. Average Emission Rates of Nitrogen Oxides
from Existing Texas and U.S. Power Plants
NOx (lb/MMBtu)
Notes:
NOx Emission Rates for New Coal-Fired Power Plants range from 0.05 to 0.08 pounds per million Btu
NOx Emission Rates for New Gas-Fired Power Plants are approx. 0.015 pounds per million Btu
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Source: EPA Acid Rain Database, 2009

12. Texas’ Electric Generating Plants Among
Cleanest SO2 Emitters in the Nation
Texas has the 24th
cleanest average SO2
emissions rate.
SO2 (lb/MMBtu)
U.S.
Average-0.458
lb/mmBtu
12
EPA Acid Rain Database, 2009

13. 1995-2009 Emission Rate Trends
Sulfur Dioxide Nitrogen Oxides
(SO2) (NOx)
lb./mmBtu lb./mmBtu
Year Nation Texas Nation Texas
1995 1.086 0.517 0.551 0.313
1996 1.096 0.527 0.518 0.314
1997 1.093 0.523 0.509 0.310
1998 1.058 0.485 0.481 0.307
1999 0.999 0.481 0.440 0.286
2000 0.875 0.380 0.399 0.261
2001 0.843 0.385 0.373 0.221
2002 0.794 0.384 0.348 0.173
2003 0.815 0.390 0.320 0.142
2004 0.779 0.353 0.286 0.124
2005 0.753 0.349 0.268 0.116
2006 0.702 0.338 0.255 0.111
2007 0.644 0.321 0.237 0.103
2008 0.564 0.316 0.222 0.103
2009 0.458 0.309 0.159 0.098
1995 - 2002 data are from the Acid Rain Program Scorecard Table B1
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2003 - 2009 data are from the Clean Air Markets Division database for the Acid Rain Program

14. Update on Federal Activites
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15. Federal: Mercury and Hazardous Air
Pollutants (HAPs)
 Bush Administration rulemaking (CAMR) on Mercury was vacated by
courts March 2008.
 The EPA entered a settlement to propose a new Mercury control rule in
March of 2011 with a final rule in November of 2011 and compliance will
be required around ~2014 .
 The EPA is developing a Maximum Achievable Control Technology
(MACT) standard for power plants; will include all “hazardous air
pollutants” – not just mercury.
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16. Federal: Clean Air Transport Rule (CATR)
 Bush Administration rulemaking on Clean Air Interstate Rule (CAIR) was
remanded December 2008. CAIR was a cap-and-trade proposal for SO2 and
NOx for the eastern U.S.
 On July 6, 2010, the EPA proposed the CATR, which will replace CAIR when
final.
 The EPA anticipates the final CATR in 2011.
 CATR applies to 31 eastern states (including Texas) requiring SO2 and NOx
emission reductions.
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17. Federal: Ozone
 In 2008, the Bush Administration set a new Ozone National Ambient Air
Quality Standards (NAAQS) of 0.075 parts per million (ppm).
 In January 2010, EPA proposed lowering the ozone standard to between
0.060 and 0.070 ppm.
 A final rule is expected in October 2010; compliance required ~2016-31.
 A new standard will require revisions to the State Implementation Plan
(SIP).
 The large urban areas and some East Texas areas are likely to be non-
attainment for the new standard and will require a new SIP.
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18. Federal: SO2 / Regional Haze
 Under the Clean Air Act, the EPA reconsiders every five years all of the National
Ambient Air Quality Standards (NAAQS).
 In December 2009, EPA proposed lowering the SO2 standard to be approximately
50% to 75% more stringent that the current standard.
 In June 2010, the EPA announced a final 75ppb 1-hour SO2 standard with
compliance required ~ 2017.
Regional Haze
 Requires reductions primarily in SO2 emissions based on best available retrofit
technology (BART) for different types of facilities, including electric generating units,
industrial boilers, and refineries.
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19. Federal: Greenhouse Gas (GHG) Regulation
“Tailoring Rule” for GHG permitting
 In June 2010, EPA issued a final “Tailoring rule” to require GHG emission
permitting but ‘Tailored’ for larger sources such as power plants and
refineries.
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20. Federal: Coal Combustion Residuals (CCR)
 On 4 separate occasions in administrations from both political parties,
EPA has studied the regulation of CCRs and has always concluded that
they should be classified as non-hazardous, and regulated by the states.
 In June 2010, the EPA proposed a rule for federal regulation of coal
combustion residuals (CCR) which include fly ash, bottom ash and
scrubber byproduct.
 EPA presented two primary options to regulate CCRs: (1) as non-
hazardous wastes under Subtitle D of RCRA, or (2) under RCRA's
Subtitle C hazardous waste controls (EPA’s preferred option).
 EPA’s proposed Subtitle C ‘hazardous’ classification would not only raise
the cost of disposal of the CCRs but would also have a chilling effect on
any and all CCR recycling.
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21. Federal: Water Quality
Cooling Towers under Clean Water Act Sec.316(b)
 EPA is revising its cooling water intake structure rules under the Clean Water Act
(CWA) Section 316(b) for new and existing power plants.
 EPA plans for a proposed rule in December 2010 and a final rule by July 2012.
 EPA wants to propose that new and existing once-through cooling plants retrofit
cooling towers.
Electric Generating Unit- Effluent Limitation Guidelines (ELGs)
 In September 2009, EPA announced its intention to review the Steam Electric
Generating Unit (EGU) Effluent Limitation Guidelines (ELGs).
 EPA believes wastewater discharges will increase due to installation of new pollution
control equipment at EGUs.
 In June 2010, the EPA distributed an Information Collection Request (ICR) to EGUs
across the U.S. (including several Texas’ genearting units) and a final rule is
anticipated in 2014.
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