1. Update on the Electric
Industry in Texas
Legislative Staff Briefing!
February 18, 2011 !
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.
2
3. AECT Member Companies!
Within ERCOT!
Retail Electric Providers
Transmission and Distribution Utilities
Generation Companies
3
4. AECT Companies!
Outside of ERCOT!
SERC Reliability Corporation
Southwest Power Pool (SPP)
Western Electricity Coordinating
Council (WECC)
4
6. February 2:!
Controlled Outages Throughout Texas!
• On February 2, a day when each major city in Texas faced
morning temperatures below 25 degrees, 82 generation units
either went offline or were unable to start.
• At the height of the outages, over 8,000 MW of generation was
unavailable.
• ERCOT, the electric grid operator that covers most of the state,
and each utility have procedures governing emergencies like this,
and as the problem rapidly worsened, Texans faced a series of
controlled outages.
• As designed, the controlled outages prevented much more
widespread and long-lasting blackouts.
6!
7. More than 8,000 MW of Generation
Dropped Off Overnight!
February 2, 2011
7!
Source: ERCOT Presentation to Joint Senate Committees, February 15, 2011
8. Learning from the Power Outages!
Severe Weather Was the Cause
• February 2-4 saw the coldest sustained temperatures in Texas in 20
years.
• From mechanical failures to pressure drops in natural gas supply lines to
inoperable equipment, each reported cause of a generation outage or
reduction in output was related to the severe cold.
Different Types of Power Plants Were Affected
• Coal and natural gas power plants were among the units affected.
Plants Were Affected Throughout the State
• Power plants were affected throughout the state, and the power supply
was constrained to the Rio Grande Valley all the way to El Paso.
• Plants affected were operated by both competitive and regulated owners.
8!
9. The generation loss was system-wide
and covered units of all ages and
multiple types of fuel!
Generation Range
0 – 99 MW
100 – 199 MW
200 – 399 MW
400 – 799 MW
≥ 800 MW
9!
Source: ERCOT Presentation to Joint Senate Committees, February 15, 2011
10. Learning from the Power Outages!
Rolling Outage Protocols Successfully Protected the Grid
• The ERCOT and utility rolling outage protocols are designed to prevent
the entire grid from failing.
– ERCOT asks the utility to shed load; the utility then select customer areas (feeders) to
perform rolling outages.
• The protocols attempt to minimize the impact on individual consumers
while ensuring the electric grid remains stable, resulting in no further
harm.
There Are Lessons to Be Learned
• Winterization procedures, communications protocol and regulatory
oversight of natural gas for power generation have all been discussed at
recent hearings.
10!
11. Prices in the Competitive Electric
Market in ERCOT !
11
12. Potentially High Winter !
Electric Bills!
• Typically, the largest portion of customers’ electric bills are
calculated based on the price of electricity and the amount
consumed.
• So even though electric prices have declined substantially in
recent years, residents may still see increased electric bills due to
higher consumption.
12!
13. Lower Bills Through!
Choice and Energy Efficiency!
• Customers in the competitive retail electric market can visit
www.powertochoose.org to learn more about available options.
• 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.
• Additional resources
– 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
13!
14. Natural Gas Prices Have Been Volatile
Since 2000!
• Through 1999, natural gas prices were relatively stable, but the cost of this key
commodity has fluctuated greatly since 2000, with three exceptionally large peaks
during the past decade.’
• While prices have fallen over the past 18 months, natural gas prices today are still
double the price of gas in 1999.
• Despite this volatility, consumers have offers available in the market lower than
before competition began. 14!
15. ERCOT Generation Mix More Gas-
Heavy than U.S. Average!
ERCOT U.S. Average
Other
Energy (MWh)
Wind Renewable Petroleum
8% 1% (Mostly Hydro) 1%
Natural Gas
Nuclear 9% 21%
Nuclear
13%
38% 20%
40%
Natural Gas
48%
Coal
Coal
Other
Wind Oil
2%
Renewable
11% (Mostly Hydro) 6%
Capacity (MW)
Nuclear Natural Gas
6% 14%
39%
22% Nuclear 10%
Coal
59%
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.
15!
Sources: ERCOT (2010 data), EIA (2009 data, latest available)
17. ERCOT far More Dependent !
On Gas Than Neighboring Power!
Regions!
% MWh from Natural Gas
% MWh from Coal
% MWh from Nuclear
% MWh from Hydro
% MWh from Other
17!
18. Competitive electricity prices still track
natural gas, but enable customer choice
and lower prices
NYMEX Average 12-Month Strip
Natural Gas vs. Texas Residential Retail Average Lowest Offer
Electricity Prices In Areas Now Open to Before Electric With Electric
Average Competitive Offer
Competition Competition Competition
1992 – 2010 YTD; $/MMBtu and ¢/kWh
Residential Electricity Price
NYMEX Natural Gas, 12-month Strip Annual Average (¢/kWh)1
‘02-11 Natural Gas Avg:
Annual Average ($/MMBtu)
$6.65/MMBtu (+215%)
‘92-99 Natural Gas Avg:
$2.11/MMBtu
18 !
18
19. CENTS PE R KWH
5
7
9
11
13
15
17
19
LOWEST
DALLAS/FT
WORTH
PRICE
LOWEST
HOUSTON
PRICE
LOWEST
LEWISVILLE
PRICE
LOWEST
ABILENE
-‐
1
YR
FIXED
LOWEST
ABILENE
PRICE
Idaho
LOWEST
CORPUS
CHRISTI
PRICE
North
Dakota
Utah
Washington
Na;onal
Average
LOWEST
DALLAS/FT
WORTH
-‐
1
YR
LOWEST
LEWISVILLE
-‐
1
YR
FIXED
FIXED
Louisiana
Nebraska
Arkansas
LOWEST
HOUSTON
-‐
1
YR
FIXED
Wyoming
Oregon
LOWEST
CORPUS
CHRISTI
-‐
1
YR
FIXED
Missouri
South
Dakota
West
Virginia
Kentucky
Oklahoma
Montana
Georgia
New
Mexico
Kansas
Arizona
Every Competitive Area in ERCOT Has
North
Carolina
Sources: Energy Information Administration, www.powertochoose.org
Tennessee
Variable and 1-Year Lock Offers Available
Indiana
Virginia
Colorado
Mississippi
Iowa
that are Lower than the National Average Price
Minnesota
Alabama
South
Carolina
Ohio
US
AVERAGE
Florida
All
Data
from
November
2010
Illinois
Michigan
Nevada
Pennsylvania
RESIDENTIAL
RETAIL
ELECTRICITY
PRICES
Wisconsin
District
of
Columbia
Maryland
Delaware
MassachuseTs
California
Maine
Vermont
Rhode
Island
New
Jersey
Alaska
New
Hampshire
New
York
ConnecVcut
Hawaii
19!
20. Texas competitive electric prices compare
well to the rest of the nation
2001 State Ranking (Pre-Competition)
¢/kWh
November 2010 (Latest Available)
State Price Rank
Average lowest offer in Improved by 8 Spots
Texas competitive areas in with Competition
¢/kWh
February ‘11 – 6.7¢/kWh
Average lowest offer
November‘10 – 7.3¢/kWh
Sources: EIA average annual residential rates for 2001 & Nov. 2010 monthly data (latest available information). Average of lowest
available prices in the 5 competitive TDU areas from www.powertochoose.org (11/16/10 and 2/14/11) for residential customers using
an average of 1,000 kWh per month 20!
21. Web: AECT.net
Blog: AECTnet.wordpress.com
Twitter: twitter.com/AECTnet
Facebook: Association of Electric Companies of
Texas, Inc.
Email: info@aect.net
21!
