Update  on  the  Texas  Electric  Industry    

Legisla)ve  Staff  Briefing  

March  20,  2014  

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  commiHed  to:    

 -­‐  Ensuring  a  modern,  reliable  infrastructure  for  the  supply  &  delivery  of          electricity.  

   -­‐  Suppor)ng  efficient  compe))ve  markets  that  are  fair  to  customers  and          market  par)cipants.  

   -­‐  Suppor)ng  consistent  and  predictable  oversight  and  regula)on  that  will          promote  investment  and  ensure  the  stability  of  Texas’  electric  industry.  

   -­‐  Promo)ng  an  economically  strong  and  environmentally  healthy  future  for          Texas,  including  conserva)on  and  efficient  use  of  available  resources.  

 •  AECT  member  companies  remain  dedicated  to  providing  Texas  customers  with        reliable  service  and  are  commiHed  to  the  highest  standards  of  integrity.    The  Associa+on  of  Electric  Companies  of  Texas,  Inc.  (AECT)  is  a  trade  organiza+on  of  investor-­‐owned  electric  companies  in  Texas.  Organized  in  1978,  AECT  provides  a  forum  for  member  company  representa+ves  to  exchange  informa+on  about  public  policy,  and  to  communicate  with  government  officials  and  the  public.  For  more  informa+on,  visit  www.aect.net.  

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AECT  Companies  Within  ERCOT  

Transmission  and  Distribu)on  U)li)es  

Retail  Electric  Providers  

Genera)on  Companies  Total ERCOT Capacity:

>74,000 MW

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AECT  Companies  Outside  of  ERCOT  

Western  Electricity  Coordina)ng  Council  (WECC)  

Southwest  Power  Pool  (SPP)  

Midcon)nent  Independent  System  Operator  (MISO)  

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 Market  Update  

   

Winter  Weather  Causes  Higher  Usage    

Sharyland  Moves  to  Compe))on    

TDU  Issues  

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Daily Low Temperature (Austin) 11/1/13 - 3/15/14 - Compared With Average

Average 13-14

December January November February March

Cold  Texas  Weather    Has  Con)nued  into  March  

Source: Weather Underground

Two  out  of  every  three  days  below  historical  average  

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Unusually  Cold  Winter  Temperatures    Mean  Higher  Electricity  Use  

•  ERCOT  net  system  demand  met  new  monthly  record  peaks  in  October,  November  and  December  last  year  

•  ERCOT  set  a  new  winter  peak  demand  record  of  57,277  MW  on  January  7  

•  ERCOT  set  a  new  monthly  peak  demand  record  for  March  of  54,549  MW  –  more  than  11,500  MW  higher  than  the  previous  record  set  in  March  2002  –  By  this  )me  of  year,  many  power  plants  are  undergoing  

necessary  maintenance,  since  it’s  normally  the  )me  of  lowest  demand  in  Texas  

•  Extended  cold  weather  affects  Texans  more  than  most:  about  half  of  Texas  households  use  electricity  for  hea)ng,  compared  with  34%  na)onwide  –  Electric  heaters  use  three  )mes  as  much  energy  as  air  

condi)oners  

•  Download  the  ERCOT  app  for  iPhone  and  Android  to  receive  ERCOT  weather  alerts  and  calls  for  conservaAon  

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Low  Electric  Rates  x  High  Usage  =  Increased  Bills  

•  The  largest  por)on  of  customers’  electric  bills  are  calculated  based  on  the  price  of  electricity  and  the  amount  consumed,  so  even  though  generally  electric  prices  have  not  risen  over  the  past  year,  customers  may  s)ll  see  increased  electric  bills  due  to  higher  consump)on.  

•  The  prices  shown  above  are  illustra)ve.  The  actual  bill  will  depend  on  the  customer’s  electric  rate  and  actual  monthly  usage.  

 Electric  Rate  

 

10.5¢/kWh  

Monthly  Electric  Usage  

 

1,200  kWh  

Monthly  Electric  Bill  

 

$126.00  Average  of  all  offers  in    the  market  in  February  

Higher-­‐than-­‐normal    February  electric  usage  

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 Market  Update  

   

Winter  Weather  Causes  Higher  Usage    

Sharyland  Moves  to  Compe))on    

TDU  Issues  

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Sharyland  U)li)es  Service  Area  Open  to  Compe))on  

Customers  in  the  Brady,  Celeste,  

Colorado  City,  and  Stanton  service  areas  of  Sharyland  U)li)es  are  now  able  to  shop  for  electric  services  

from  compe))ve  REPs.    

Sharyland  Customers  in  McAllen  are  not  affected  by  the  

transi)on,  as  they  were  already  part  of  the  compe))ve  market  

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Shopping  for  Electricity  in  the  Sharyland  U)li)es  Service  Territory  

•  The  move  to  electric  compe))on    provides  electric  customers  the    opportunity  to  shop  for  electric    plans  via  REP  websites  or  the    PUC's  Power  to  Choose  website.  

•  The  compe))ve  market  offers    consumers  a  choice  of  a  variety  of    service  op)ons  from  numerous    retail  electric  providers.  Retail    compe))on  has  given  consumers  the  ability  to  choose  from  innova)ve  specialty  plans  that  meet  their  needs  —  including  green  power,  )me-­‐of-­‐use  rates,  and  other  promo)ons  and  incen)ves.  

•  Further,  certain  Sharyland  customers  will  be  able  to  qualify  for  benefits  that  are  available  in  compe))ve  areas—for  example,  the  LITE-­‐UP  Texas  program  offers  assistance  with  electric  bills  to  qualified  low-­‐income  customers  living  in  Texas'  compe))ve  areas.    

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 Market  Update  

   

Winter  Weather  Causes  Higher  Usage    

Sharyland  Moves  to  Compe))on    

TDU  Issues  

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Compe))ve  Renewable  Energy  Zones  Lines  Completed  

•  In  December  2013,  ERCOT  reported  the  comple)on  of  the  CREZ  build-­‐out  

•  ERCOT  is  expected  to  have  over  16,500  MW  of  wind  power  installed  by  the  end  of  2016  

CREZ  Lines  Completed  

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Advanced  Meter    Opt-­‐Out  Cases  at  the  PUC  

•  The  PUC’s  rule  allowing  customers  to  opt-­‐out  of  advanced  metering  service  was  adopted  on  August  9,  2013.    –  AEP  Texas,  CenterPoint  Energy,  Oncor  and  Texas-­‐New  Mexico  Power  Company  

have  filed  compliance  tariffs  outlining  proposed  costs  for  non-­‐standard  metering  service  and  ongoing  service.    

•  Based  on  typical  procedural  schedules,  it  is  expected  that  the  opt-­‐out  process  will  begin  this  summer.  –  Each  TDU’s  tariff  is  undergoing  a  contested  case  hearing  at  the  PUC.    

–  45  days  ajer  adop)on  of  tariffs,  customers  who  have  requested  to  remain  without  an  advanced  meter  will  receive  a  no)ce  of  costs  and  instruc)ons  for  op)ng  out.  They  must  give  no)ce  and  provide  payment  within  60  days  of  no)ce.  

–  Customers  who  choose  to  replace  their  advanced  meter  in  the  future  will  pay  the  up-­‐front  costs  and  have  a  meter  installed  within  30  days.  

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Physical  Security  of    Electric  Grids  

•  While  electric  u)li)es  and  regulators  cannot  publicize  their  individual  and  collec)ve  security  ac)vi)es,  all  recognize  that  maintaining  the  physical  security  of  the  electric  grid  is  of  paramount  importance.    

 

•  Maintaining  the  physical  security  of  substa)ons,  transformers  and  other  assets  keeps  the  power  flowing  to  the  neighborhoods  and  businesses  who’ve  come  to  expect  a  high  level  of  electric  reliability  in  Texas.    

•  U)li)es  par)cipate  in  industry  groups  and  discussions  with  regulators  to  remain  current  on  emerging  threats  and  mi)ga)ng  techniques.    

–  These  groups  include,  but  are  not  limited  to:  the  US  Cyber  Emergency  Response  Team,  the  Na)onal  Electric  Sector  Cyber  Security  Organiza)on,  the  Department  of  Homeland  Security,  the  US  Nuclear  Regulatory  Commission  and  NERC.    

–  U)li)es  also  apply  the  knowledge  gained  by  con)nuing  to  invest  in  technology,  processes  and  services  to  detect,  mi)gate  and  protect  our  physical  and  cyber  assets.  These  investments  include  upgrades  to  network  architecture,  regular  intrusion  detec)on  monitoring  and  compliance  with  emerging  industry  regula)on.  

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Geomagne)c  Disturbances  and  Electric  Grids  

•  A  geomagne)c  disturbance  (GMD),  such  as  a    solar  flare,  can  affect  electric  systems,  typically    in  the  far  northern  or  southern  hemisphere.  

•  GMDs  have  never  caused  a  blackout  of  U.S.  power    systems,  though  they  may  have  contributed  to    isolated  outages.  

•  NERC  has  developed  and  con)nues  to  develop  reliability  standards  to  mi)gate  the  risks  of  GMDs.  

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Electromagne)c  Pulses  and  Electric  Grids  

•  Some  have  recently  cited  concern  about  the  poten)al  for  the  U.S.  power  grid  to  be  harmed  by  an  Electromagne)c  Pulse  (EMP)  aHack.  –  An  electric  grid  saboteur  would  have  to  either  use  a  portable  EMP  emimng  

device  located  in  close  proximity  to  electrical  equipment  or  detonate  a  nuclear  bomb.  

•  There  is  not  a  clear  consensus  regarding  the  likelihood  and  impact  of  man-­‐made  EMP  threats  to  power  grids.  –  Protec)ng  against  the  smaller,  portable  variety  is  part  of  electric  companies’  

broader  security  ac)vi)es.  –  A  nuclear  detona)on  would  have  other  severe  impacts  unrelated  to  EMP,  and  

its  EMP  impacts  could  affect  all  electrical  systems.  

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Emergency  Preparedness  Throughout  Texas  

 •  Texas  is  prone  to  a  wide  array  of  

inclement  weather.  The  state  faces  thunderstorms  with  high  winds,  tornadoes  and,  as  seen  recently,  ice  storms.  

•  Transmission  and  distribu)on  u)li)es  in  each  part  of  the  state  work  to  ensure  that  the  power  grid  func)ons  as  normally  as  possible.    

 •  Each  u)lity  maintains  emergency  preparedness  plans  to  mi)gate  impacts  from  the  most  

common  inclement  weather,  while  maintaining  crisis  response  teams  to  quickly  respond  to  these  emergencies  and,  if  necessary,  emergencies  in  other  parts  of  the  state  or  country.    

•  U)li)es  perform  reviews  ajer  actual  ac)va)ons  of  their  emergency  plans  and  make  revisions  based  on  lessons  learned  in  order  to  beHer  prepare  for  future  emergency  events.  

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Mutual  Assistance  Groups  

Texas  Mutual  Assistance  Group      

 Midwest  Mutual  Assistance  Group  

Members  AEP  CLECO    CenterPoint  Energy    Entergy  Texas    Mississippi  Power  Company    Oklahoma  Gas  and  Electric  Company    Oncor  Electric  Delivery    Texas-­‐New  Mexico  Power  Company  

Members  AEP  

CenterPoint  Energy    

Empire  District  Electric  Company    

Entergy  Texas  

Exelon    

Kansas  City  Power  &  Light  Co.    

LG&E  Energy    

Oncor  Electric  Delivery    We  Energies    

Xcel  Energy  Inc.  Southeastern  Electric  Exchange      Texas  Members  CenterPoint  Energy    Entergy  Texas  Texas-­‐New  Mexico  Power  Company      

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Emergency  Opera)ng/Restora)on  Plans:    U)li)es  Prepare  Year-­‐Round  

•  The  goal  of  a  u)lity’s  emergency  plan  is  to  restore  service  to  its  customers  –  safely,  quickly  and  efficiently.    

•  In  addi)on  to  linemen  and  local  contractors,  an  emergency  plan  typically  includes  virtually  every  company  employee  -­‐  even  those  who  do  not  tradi)onally  work  in  the  field.    

•  Through  electric  u)lity  mutual  assistance  programs,  most  u)li)es  have  access  to  thousands  of  linemen  and  tree  trimmers  from  around  the  country.    

•  The  u)li)es  also  work  to  ensure  access  to  lodging,  fuel,  food,  supplies  and  equipment.  

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Basic  Priority  Restora)on  

 In  compeAAve  areas  of  the  state,  restoraAon  of  power  is  not  affected  by  a  customer’s  choice  of  retail  electric  provider.  A  typical  plan  consists  of  four  phases  of  restoraAon:      

•  Service  to  facili)es  vital  to  safety,  health  and  welfare,  such  as  hospitals,  water  treatment  plants  and  public  service  facili)es.  

•  Service  to  customers  whose  power  is  out  due  to  damage  to  major  power  lines,  which  serve  thousands  of  customers.  

•  Service  to  customers  whose  power  outage  was  caused  by  damage  to  smaller  sec)ons  of  power  lines  serving  hundreds  of  customers.  

•  Service  to  customers  who  have  outages  caused  by  damage  to  equipment  that  typically  serves  less  than  ten  customers.  

The  )meline  for  restora)on  is  heavily  dependent  on  the  severity  of  the  weather  event  and  the  extent  of  the  areas  affected.  An  extremely  severe  storm  can  

result  in  outages  las)ng  a  number  of  weeks.  

22"

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