the texas electric industry: a history of innovation

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Overview of innovations in the Texas electric market since 1999.

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  • The Texas Electric Industry:

    A History of Innova9on

    Legisla)ve Sta Brieng

    December 12, 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

  • 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.

  • 3

    AECT Companies Within ERCOT

    Transmission and Distribution Utilities

    Retail Electric Providers

    Generation Companies Total ERCOT Capacity:

    >74,000 MW

  • 4

    AECT Companies Outside of ERCOT

    Western Electricity Coordinating Council (WECC)

    Southwest Power Pool (SPP)

    Midcontinent Independent System Operator (MISO)

  • 5

    AECT white paper on Texas history of innovation in the electric industry

    With the passage of Senate Bill 7 in 1999, Texas created a platform for adoption of some of the most innovative, advanced technologies in the electricity industry.

    Over the subsequent 15 years, state regulators and elected officials have tended the market, allowing it to grow and meet customers needs in ways never imagined.

    Several factors will push Texas to innovate further:

    Texas population is forecasted to grow Texas economic engine including the

    oil and gas industry remains strong Homes and appliances continue to use

    electricity more efficiently New appliances, devices, and uses for

    electricity continue to become available Regulatory pressure will remain to

    reduce emissions from electricity generation aect.net i

    The Electric Industry in Texas:

    Fifteen Years of Innovation, With More to Come December 2014

  • 6

    Outside ERCOT: A single company provides retail, transmission & distribution and generation services in each area

    Power Flow Financial Flow

    Regulated

    In fully regulated markets, the PUC sets retail rates charged to end-use customers. Each of these service areas is part of multi-state electric grids, with differing regulations. In many

    cases, vertically integrated utilities purchase wholesale power from certain unregulated entities. New power plants in these regions can be built by both regulated entities and certain unregulated

    entities or qualifying facilities.

  • 7

    ERCOT: Separate companies provide retail, transmission & distribution and generation services

    Power Flow Financial Flow

    Regulated

    In the competitive market, 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.

  • 8

    The Competitive Retail Market in ERCOT

    REPs compete for customers, finding new and innovative ways to differentiate themselves.

    Texas has been recognized for having the best competitive retail electric market in North America for seven consecutive years, according to an annual report released by the Distributed Energy Financial Group.

    Today, most residential and commercial customers in the competitive market have dozens of choices for electric service that offer a wide array of customer benefits.

    Customers can choose based on price, as well as company reputation, renewable power, innovative pricing mechanisms, and the provision of other innovative products and services, like time-of-use rates.

    With these and other growth opportunities on the horizon, Texas leading competitive electricity market and the corresponding customer benefits will continue to rise.

  • 9

    REPs and offers in large competitive regions of Texas

    Source: Power to Choose, as of November 19, 2014

    AEP Texas North Service Territory

    76 One-Year Fixed Price Offers

    263 Total Offers

    AEP Texas Central Service Territory

    72 One-Year Fixed Price Offers

    242 Total Offers

    CenterPoint Energy Service Territory

    88 One-Year Fixed Price Offers

    300 Total Offers

    Oncor Service Territory

    85 One-Year Fixed Price Offers

    296 Total Offers

    Texas-New Mexico Power Co. Service Territory

    72 One-Year Fixed Price Offers

    243 Total Offers

  • 10

    Competitive electric offers are significantly below the last regulated rates of 2001

    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

    11.0/kWh 8.8/kWh 6.9/kWh 9.6/kWh 12.9/kWh

    AEP Texas North

    11.0/kWh 8.8/kWh 6.8/kWh 10.0/kWh 13.4/kWh

    CenterPoint Energy

    10.7/kWh 8.7/kWh 6.2/kWh 10.4/kWh 14.0/kWh

    Oncor

    9.7/kWh 7.7/kWh 5.2/kWh 9.7/kWh 13.0/kWh

    TNMP

    10.5/kWh 8.3/kWh 6.6/kWh 10.6/kWh 14.2/kWh

    !

    Sources: PUC Historical Data, Bureau of Labor Statistics - Consumer Price Index (34.4% inflation since 2001), www.powertochoose.org offers as of November 3, 2014

    November 2014 December 2001

  • 11

    Texas competitive market prices compared with those of other states

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    Sources: PowerToChoose.org offers as of August 1, 2014 U.S. Energy Information Administration, latest available data as of November 19, 2014

  • 12

    Electric prices remain a great deal compared with other products

    Sources: Public Utility Commission of Texas (ERCOT electricity data 2001), U.S. Energy Information Administration (U.S. Average Electricity Prices), Power to Choose (Competitive Prices) Bureau of Labor Statistics (All other statistics; data from December 2001 to September 2014 [latest available])

    Gallon of Gas 201%

    Dozen Eggs 113%

    Ground Beef 94%

    Ground Coee 79%

    U.S. Average Residen)al Electricity 57%

    Hourly Legal Services 56%

    Loaf of White Bread 40%

    Houston-Galveston-Brazoria Rent 39%

    Dallas-Fort Worth Rent 26%

    Gallon of Milk 21%

    ERCOT Average Lowest Fixed Price Oer -18%

    ERCOT Average Lowest Available Oer -37%

    Price Change: December 2001 to September 2014 (Latest Available)

  • 13

    Continued Transmission and Distribution Investment Needed Throughout Texas

    According to the Texas State Data Center, 10 million new residents are expected in Texas by 2040.

    Though not shown here, areas of Texas located outside the ERCOT grid are also growing, both in terms of population and economic development.

    In the last two years, utilities completed more than $4.0 billion in transmi

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