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Legislative Advertising Paid For by: Association of Electric Companies of Texas
1005 Congress, Suite 1000, Austin, TX 78701 • 512-474-6725 • www.aect.net
2019
Electricity 101
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Regional Transmission Operators in North America
www.aect.net (512) 474-6725
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Generation Companies
Transmission & Distribution Utilities
AECT Companies within ERCOT
www.aect.net (512) 474-6725
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Retail Electric Providers
Total ERCOT Capacity:
>78,000 MW
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Western Electricity Coordinating Council (WECC)
Midcontinent Independent System Operator (MISO)
Southwest Power Pool (SPP)
AECT COmpanies Outside of ERCOT
www.aect.net (512) 474-6725
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Total ERCOT Capacity:
>78,000 MW
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AECT Is Comprised of Investor-Owned Utilities
www.aect.net (512) 474-6725
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AECT does not include Municipally-Owned Utilities or Electric Cooperatives
Service Territories of Utilities Represented by AECT
El Paso Electric Co.
Xcel Energy
AEP SWEPCO
Entergy Texas
CenterPoint Energy
AEP Texas Central Company
AEP Texas North Company
Oncor
Texas-New Mexico Power Co.
Legend
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Overview of ERCOT
www.aect.net (512) 474-6725
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ERCOT: By the Numbers
• 90% of the electric load in Texas is in ERCOT• 75% of ERCOT’s load is in the competitive
market, including 24 million customers• Over 610 generating units, providing
>78,000 MW of generating capacity during peak demand
• 46,500 miles of high-voltage transmission
ERCOT Responsibilities
• System reliability – planning and operations• Wholesale market settlement for electricity
production and delivery• Retail switching process for customer choice• Open access to transmission
ERCOT region
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Steps to Electric Competition in Texas
www.aect.net (512) 474-6725
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Wholesale competition legislation passed (SB 373)
May1995
Jan.2002
Retailcompetition legislationPassed (SB 7)
June 1999
Sept. 1999
ERCOT Electric rates frozen
Jan. 2005
July 2001
Texas Choice pilot program begins
Affiliate REPs allowed to offer non-price-to-beat prices
Retail choice begins in ERCOT
Jan. 2007
End of price-to-beat
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Steps to Competition: Wholesale Market
www.aect.net (512) 474-6725
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Senate Bill No. 373 enacted in May 1995
– Required utilities to provide non-discriminatory open access transmission to support wholesale competition in ERCOT.
– Recognized new, unregulated participants in ERCOT wholesale market.
Exempt wholesale generators
Power marketers
– Allowed non-utility wholesale market participants to offer market-based prices in ERCOT.
– Deregulated electric cooperative distribution rates.
Note: Non-ERCOT areas are subject to FERC jurisdiction for wholesale services, including transmission services.
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Steps to Competition: Retail Market
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ERCOT market restructuring legislation, Senate Bill 7, passed in 1999– Initiated competition in ERCOT retail markets beginning January 2002.– Municipally-owned utilities and electric cooperatives allowed to “opt-in”.– Included environmental and energy efficiency provisions.
• Required reduction of nitrogen oxide (NOx) emissions from older power plants by 50%, and sulfur dioxide emission from coal-fired facilities by 25%.
• Utilities required to fund energy efficiency programs equal to at least 10% of each year’s annual growth in demand.
– 1999 - 2001 – Preparation for retail competition.• Electricity rates frozen.• ERCOT develops systems required to support competition.• PUC promulgates competition rules.• PUC determines rate unbundling cases.
– July 2001 – Retail competition pilot project begins.
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ERCOT: Separate Companies Provide Retail, Transmission & Distribution and Generation Services
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• In competitive markets, 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.
Power FlowFinancial Flow
Regulated
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Outside ERCOT: A Single Utility Provides Retail, Transmission & Distribution and Generation Services In Each Area
www.aect.net (512) 474-6725
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• In fully regulated markets, the PUC sets retail rates charged to end-use customers.• Each of service area is part of a multi-state electric grid, with differing regulations. In
many cases, vertically integrated utilities purchase wholesale power from certain unregulated entities.
Power FlowFinancial Flow
Regulated
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The ERCOT Competitive Retail Electric Market is Providing Customer Benefits
www.aect.net (512) 474-6725
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Key Facts on the Competitive Retail Market in ERCOT
– Price offers are substantially lower than prices available just before competition began
– Texas’ national electric price ranking has improved since the market opened in 2002
– Every competitive area in ERCOT has variable and 1-year lock offers available that are far lower than the national average price and nearly all state averages
– Among states like Texas that depend heavily on natural gas for power generation, Texas prices compare favorably, with even lower prices available to those in the competitive market
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Lower Prices Available Today thanBefore Competition Began
www.aect.net (512) 474-6725
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Service Area Average Fixed-Price
Offer (12-month term)
Lowest Fixed-Price Offer
(12-month term)
Lowest Offer Available
Dec. 2001 prices, not adjusted for
inflation
Dec. 2001 prices, adjusted for inflation
AEP Texas Central
12.5¢/kWh 6.3¢/kWh 6.1¢/kWh 9.6¢/kWh 13.7¢/kWh
AEP Texas North
12.1¢/kWh 5.9¢/kWh 5.5¢/kWh 10.0¢/kWh 14.3¢/kWh
CenterPoint Energy
11.9¢/kWh 5.6¢/kWh 5.5¢/kWh 10.4¢/kWh 14.9¢/kWh
Oncor
11.1¢/kWh 4.5¢/kWh 4.5¢/kWh 9.7¢/kWh 13.9¢/kWh
TNMP
12.1¢/kWh 6.2¢/kWh 5.8¢/kWh 10.6¢/kWh 15.2¢/kWh
Sources: PUC Historical Data, Bureau of Labor Statistics Inflation Calculator (43.1% inflation since December 2001); www.powertochoose.org offers as of December 3, 2018
December 2018 December 2001
Service Area
Average Fixed-Price Offer
(12-month term)
Lowest Fixed-Price Offer
(12-month term)
Lowest Offer Available
Dec. 2001 prices, not adjusted for inflation
Dec. 2001 prices, adjusted for inflation
AEP Texas Central
12.5¢/kWh
6.3¢/kWh
6.1¢/kWh
9.6¢/kWh
13.7¢/kWh
AEP Texas North
12.1¢/kWh
5.9¢/kWh
5.5¢/kWh
10.0¢/kWh
14.3¢/kWh
CenterPoint Energy
11.9¢/kWh
5.6¢/kWh
5.5¢/kWh
10.4¢/kWh
14.9¢/kWh
Oncor
11.1¢/kWh
4.5¢/kWh
4.5¢/kWh
9.7¢/kWh
13.9¢/kWh
TNMP
12.1¢/kWh
6.2¢/kWh
5.8¢/kWh
10.6¢/kWh
15.2¢/kWh
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Texas’ National Price Ranking HasImproved Since 2001
www.aect.net (512) 474-6725
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0
5
10
15
20
25
30
LA WA AR ID TN UT KY OK
MS
MO
WV OR FL OH TX NC
NV
MT
VA GA IL
ND
WY
NE IN SC DE AL
CO DC SD KS AZ N
M IA MD PA MN WI
MI
NJ
ME VT NY CA NH CT MA RI AK HI
Sources: EIA average annual residential rates for 2001 and Sept. 2018 monthly data (latest available information); Power to Choose data as of Sept. 4, 2018Note: Average lowest available price is for a residential customer using an average of 1,000 kWh per month
¢/kW
h¢/
kWh
2001 State Ranking (Pre-Competition)
September 2018 State Ranking (Latest Available)
Average lowest 12-month fixed price offer
in competitive market in September 2018:
4.8¢/kWh
0
5
10
15
20
KY WA ID WV OR TN ND NE
UT
WY
MT IN MO AL OK
MS SD CO MN KS MD SC AR GA DC VA WI
LA NC MI
AZ OH IA FL DE IL
NM TX NV PA NJ
CT CA AK RI
MA
NH VT ME
NY HI
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Electric Price Offers Compared With Other Retail Products
www.aect.net (512) 474-6725
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Sources: Dec 2001 electric rates: Public Utility Commission of Texas; October 2018 electric rates: Power to Choose for 1,000 kWh/usage with no usage fees or credits; All other data: U.S. Bureau of Labor Statistics (October data; latest available)
Gallon of Gas 155%
Ground Beef 117%
Dozen Eggs 79%
Hourly Legal Services 77%
Houston-Galveston Rent 64%
Dallas-Fort Worth Rent 57%
U.S. Average Residential Electricity 51%
Ground Coffee 47%
Loaf of White Bread 27%
Gallon of Milk 1%
ERCOT Average Lowest Variable Offer -1%
ERCOT Average Lowest 1-Year Fixed Price Offer -51%
Price Change: December 2001 to October 2018
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Average 1-Year Fixed Price Offers in ERCOT Are Significantly Lower than the National Average Price
www.aect.net (512) 474-6725
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10
15
20
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Sources: PowerToChoose.org offers as of September 4, 2018U.S. Energy Information Administration, latest available data
U.S. Average
RESIDENTIAL RETAIL ELECTRICITY PRICESAll Data from September 2018
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Texas Market Compares Favorably to Other States Utilizing Natural Gas as the Primary Generation Source
www.aect.net (512) 474-6725
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0
5
10
15
20
25
AK RI MA CA NY ME NV TX FL MS LA
Sources: EIA average annual residential rates for September 2018 monthly data (latest available information); Power to Choose data as of September 4, 2018
Note: Average lowest available price is for a residential customer using an average of 1,000 kWh per month
Average Lowest Available 12-Month Fixed Price Offer in ERCOT
Competitive Market (November 2018): 4.8¢/kWh
RESIDENTIAL PRICE AMONG NAUTRAL-GAS INTENSIVE STATES All data from September 2018
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Protections in the Market for Retail Customers
www.aect.net (512) 474-6725
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• Make Spanish-language support available to customers• Place customer deposits in interest-bearing accounts
and return that interest to customers when the deposit is returned
• Follow a mandated timeline for disconnection of customers
• Provide notice in case of disconnection• Investigate any customer complaint within 21 days• Provide a Terms of Service Statement detailing contract
terms, cancellation penalties, deposit requirements, fees, payment arrangement options, how to cancel service, and other obligations of the REP
• Allow a customer to cancel a service agreement within three federal business days after receiving the terms of service
• Allow a customer to cancel the switch upon receiving notification that the switch will occur
• Register with the PUC and meet financial requirements set by the Commission
• Communicate clearly with consumers regarding notice of contract expiration
• Demonstrate creditworthiness to purchase power to serve its customers
• Demonstrate the technical ability to supply electricity• Maintain privacy of customer information• Not discriminate among customers• Not add charges to a customer’s electric bill for
services not requested by the customer• Provide a “Your Rights as a Customer” disclosure• Provide an Electricity Facts Label to allow for an
“apples-to-apples” comparison among REPs• Make deferred payment plans available for those
expressing an inability to pay
Among other requirements, REPs serving residential customers must:
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Transmission & Distribution Utilities Provide Reliable Delivery of Electricity
www.aect.net (512) 474-6725
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Role of Transmission & Distribution Utilities
– Provide reliable delivery of electricity on a 24-7 basis.– Invest in and build infrastructure (e.g., transmission lines, Smart Grid) to support the
needs of Texas’ growing economy.– Manage their transmission networks under the direction of ERCOT; coordinating with
ERCOT on transmission planning activities.– Respond to outages (e.g., storms and disasters) that affect the grid and restore service as
quickly as safely possible.– Provide key market information, such as premise information and metering services to
facilitate successful operation of the ERCOT deregulated market.– Provide regulated transmission and distribution services to facilitate operations of
wholesale and retail business entities.
– Charge regulated delivery rates to REPs Rates based on a historical cost of service including a PUC-established return on capital
investment
Allocation of ERCOT-wide transmission costs
Non-bypassable charges include the cost to deliver electricity, System Benefit Fund, recovery of true-up costs and nuclear decommissioning expenses for existing nuclear facilities
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Timeline of Transmission Line Construction
www.aect.net (512) 474-6725
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• While certain types of generation can be constructed quickly -- often as short as 12-18 months --transmission lines typically take between three and five years. Generation can be brought into the market more rapidly if the siting takes advantage of the existing transmission infrastructure.
• Building long transmission lines can affect many landowners, often requiring a lengthy and extensive easement acquisition effort.
• The transmission line siting process must take into account the impact of those lines on environmentally sensitive and historically significant lands.
• Utility is not typically allowed to begin recovering costs until year 5 or 6.
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Transmission Line Routing Process
www.aect.net (512) 474-6725
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1. The utility files an application with the PUC to obtain a Certificate of Convenience and Necessity (CCN), which is assessed by the PUC
• Consideration include: the need for service; whether the route uses existing rights-of-way; parallels other rights-of-way; follows property lines; and conforms with the policy of prudent avoidance to limit overall impact of the line
2. Landowners who would be affected by a new line receive notice; landowners can informally file a protest or formally participate in the case as an intervenor
3. An administrative law judge (ALJ) holds a prehearing conference to set a schedule for the case
4. Parties to the case conduct discovery to gather facts on the case
5. An ALJ hearing is held, with cross-examination of witnesses. The ALJ and the PUC will rely on factual information submitted as evidence filed in the docket and presented during discovery
6. The ALJ makes a recommendation to the PUC, which is called a proposal for decision
7. The PUC Commissioners rule on the case and may approve it, modify it, request further action by the ALJ or deny the case. After the PUC’s ruling, parties may appeal the decision
Brochure provided to landowners affected by a proposed transmission
line
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Continued Transmission & Distribution and Generation Investment Needed Long-Term
www.aect.net (512) 474-6725
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• According to the Texas State Data Center, 5 million new residents are expected in Texas by 2020.
• New generation must be delivered effectively and efficiently to population centers of the state.
• Areas of Texas located outside the ERCOT grid are also growing, both in terms of population and economic development, requiring transmission investment.
Source: ERCOT, “Report on Existing and Potential Electric System Constraints and Needs,” December 2018
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www.aect.net (512) 474-6725
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Technology Threats: Cyber Attacks and InfiltrationAvoidance and Preparation
o “Good Cyber Hygiene”: Maintain best practices, share information with other utilities and hold regular briefings to avoid human error, such as clicking on a malicious email or installing Trojan horse software
o Ongoing briefing and Communications: Communicate with federal agencies regarding grid hacking activities
o Investment: Major hardware and software investment specifically aimed at identifying cyber attack activity, plus investment in cyber security divisions staffed with financial industry and military backgrounds
Response in case of Major outage
o Mitigation: Ensure systems can be segmented from one another to limit the impact of a cyber attack
o Recovery: Ensure critical facilities are primed for backup and quick recovery
o Restoration, Cooperation and Recovery of Systems: As with other types of outage, utilities are designed to be restored through robust systems, cooperation with government entities and able to be rebuilt
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The Competitive Wholesale Market in ERCOT
www.aect.net (512) 474-6725
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Competition Has Brought Greater Efficiency to the Wholesale Market
– Generators shoulder the risk of building new power plants, bringing efficient, cost-effective generation to consumers.
– New power plants produce more electricity per unit of fuel.
– Operational efficiency of a competitive market helps push wholesale prices downward.
– The competitive market will continue to bring forward the right mix of technology and fuel type based on environmental choices by policymakers.
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Increased Population Drives Future Electric Consumption
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1980 1990 2000 2010 2020 2030 2040 2050
Sources: U.S. Census, Texas Demographic Center, 0.5 migration scenario
Texas’ Projected Population Growth (millions)1980-2050
28.8
25.1
36.6
32.7
20.9
17.014.2
To meet increases in electric load created
by Texas’ rapid population and
economic growth, Texas will require additional power,
transmission and distribution,
customer demand response and energy
efficiency.
40.5
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ERCOT Generation Mix: more natural Gas than U.S. Average
www.aect.net (512) 474-6725
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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 (2017 data); EIA (2016 data)
Capa
city
(MW
)En
ergy
(MW
h)
ERCOT U.S. Average
Nuclear
Natural Gas
Coal
Non-Hydro Renewables (Mostly Wind)
Hydro
34%
30%
20%
7%1%
Coal
Nuclear
Natural Gas
Other
39%
32%
11%
1%
Coal Natural Gas
Nuclear
Wind
53%
17%
5%
22%
2%
Other
Wind
17%
Other
8%
Nuclear
Natural Gas
Coal
Non-Hydro Renewables (Mostly Wind)
44%
25%
9%
11%
7%
Other
4%Hydro
Other
OtherHydro
Hydro
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Gas on the Margin in ERCOT Nearly Year-Round
www.aect.net (512) 474-6725
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• Nuclear and coal-fired power plants in ERCOT are able to operate approximately 90 percent of the time if economically viable
• Some natural gas-fired generation operates at nearly all times to meet demand• Peaking natural gas-fired power plants are ramped on and off, depending upon demand• Wind-generated electricity is only intermittently available, depending on wind conditions
Typical August Generation
Output in ERCOT
Source: ERCOT
-
65000
70000
75000
80000
85000
90000
2 0 1 9 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3
RESOURCES LOAD
Long-Term Outlook for ERCOT Generation Resources
www.aect.net (512) 474-6725
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Source: ERCOT, “Report on the Capacity, Demand and Reserves in the ERCOT Region”, December 2018
Reserve Margin8.1%
10.7%
12.2%
9.8%7.5%
This report includes Recent retirements of coal-fired generation in its calculation of reserve margin
ERCOT Summer Resources and Firm Load Forecast: 2019-2023
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Strong Environmental Performance by Electric Generators in Texas
www.aect.net (512) 474-6725
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Electric Generators in Texas Use Fuel Efficiently and Effectively Capture Emissions
– Texas has NOx and CO2 emissions rates below the national average for electric generation
– Texas electric generators have the lowest rate of NOx emissions when compared with neighboring states
– New power plants include modern environmental emissions controls.
Maintaining Access to Cooling Water is Important to Continued Generation Reliability
– Dependable water supplies are essential to the reliable generation of electricity because most electric generation units require the use of water for system cooling.
– AECT member companies represent the largest private owners, builders, and operators of private reservoirs in Texas.
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How Texas’ Steam Power Plants Use Water
www.aect.net (512) 474-6725
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• The graphic above is a simplified example of a power plant’s use of water for steam generation.
• Most power plants heat water in a closed system until it becomes steam, then pressurize that steam to turn a generating turbine.
• The steam is then routed to a condenser, where the water is condensed and reused in the steam cycle.
Turbine Generator TransformerPump
Combustion
Water
Steam
Cooling Water
Condenser
Fuel
ControlsStack
ElectricityFlow of Power
Flow of H2O
Flow of H2O
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Summary of Tax Impact of AECT Member Companies
www.aect.net (512) 474-6725
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AECT member companies pay and collect significant taxes to
bolster state revenue
– The electric industry is a major source of state and local tax revenue in Texas.
– In 2017, members of AECT paid $1.73 billion in state and local levies. On average, this cost is $77,745 per employee.
– AECT companies also collected $295.9 million in sales taxes from end-use customers.
State and Local Taxes Paid or Collected by AECT Member Companies in 2017
TAXES IMPOSED ON AECT COMPANIESState Taxes
Gas, Electric & Water Utility TaxPublic Utilities Gross Receipts AssessmentState Sales & Use Tax (Paid on Company purchases)State Franchise Tax
Local TaxesProperty TaxesLocal Sales & Use Taxes (Paid on Company Purchases)Municipal Franchise Fees
Subtotal, Company Taxes
SALES TAXES ON AECT ELECTRIC SALESState Sales & Use Tax (Collected from Customers)Local Sales & Use Taxes (Collected from Customers)
Subtotal, Customers’ Taxes
TOTAL, STATE & LOCAL TAXES
Source: Association of Electric Companies of Texas
Millions of Dollars
$172.521.8
154.1107.4
674.641.0
556.0
$1,727.4
182.3113.6
$295.9
$2,023.3
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How To Reach Us
www.aect.net (512) 474-6725
32
For background on electric markets, environmental data and Electricity 101
Regular updates from AECT and its member companies
Keep up with pictures and links to latest documents released by AECT
AECT.net
@aectnet
AECT Advocacy on Facebook
An easy way to receive updates from AECT
The AECT App
Electricity 101Regional Transmission Operators in North AmericaAECT Companies within ERCOTAECT COmpanies Outside of ERCOTAECT Is Comprised of Investor-Owned UtilitiesOverview of ERCOTSteps to Electric Competition in TexasSteps to Competition: Wholesale MarketSteps to Competition: Retail MarketERCOT: Separate Companies Provide Retail, Transmission & Distribution and Generation ServicesOutside ERCOT: A Single Utility Provides Retail, Transmission & Distribution and Generation Services In Each AreaThe ERCOT Competitive Retail Electric Market is Providing Customer BenefitsLower Prices Available Today than�Before Competition BeganTexas’ National Price Ranking Has�Improved Since 2001Electric Price Offers Compared With Other Retail ProductsAverage 1-Year Fixed Price Offers in ERCOT Are Significantly Lower than the National Average Price Texas Market Compares Favorably to Other States Utilizing Natural Gas as the Primary Generation SourceProtections in the Market for �Retail CustomersTransmission & Distribution Utilities Provide Reliable Delivery of ElectricityTimeline of Transmission Line ConstructionTransmission Line Routing ProcessContinued Transmission & Distribution and Generation Investment Needed Long-TermTechnology Threats: Cyber Attacks and InfiltrationThe Competitive Wholesale Market in ERCOTIncreased Population Drives Future Electric ConsumptionERCOT Generation Mix: more natural Gas than U.S. AverageGas on the Margin in ERCOT Nearly Year-RoundLong-Term Outlook for ERCOT Generation ResourcesStrong Environmental Performance by Electric Generators in TexasHow Texas’ Steam Power Plants Use WaterSummary of Tax Impact of AECT Member CompaniesHow To Reach Us
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