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Legislative Advertising Paid For by: Julia Rathgeber, Association of Electric Companies of Texas
1005 Congress, Suite 600, Austin, TX 78701 512-474-6725 www.aect.net
January 26, 2017
Legislative Staff Briefing:Update on the Electric Market
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:
>77,000 MW
Western Electricity Coordinating Council (WECC)
Midcontinent Independent System Operator (MISO)
Southwest Power Pool (SPP)
AECT Companies Outside of ERCOT
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Total ERCOT Capacity:
>77,000 MW
Overview of ERCOT
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ERCOT: By the Numbers
90% of the electric load in Texas is in ERCOT 75% of ERCOTs load is in the competitive
market, including 24 million customers Over 550 generating units, providing 77,000
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
The ERCOT Competitive Retail Electric Market is Providing Customer Benefits
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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
Lower Prices Available Today thanBefore Competition Began
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Service Area
Average Fixed-Price Offer
(12-month term, no usage fees/credits)
Lowest Fixed-Price Offer
(12-month term, no usage fees/credits)
Lowest Variable Price
Offer Available
Dec. 2001 prices, not adjusted for
inflation
Dec. 2001 prices, adjusted for inflation
AEP Texas Central
9.4/kWh 5.0/kWh 7.9/kWh 9.6/kWh 12.8/kWh
AEP Texas North
9.4/kWh 5.6/kWh 7.9/kWh 10.0/kWh 13.3/kWh
CenterPoint Energy
8.8/kWh 4.8/kWh 7.8/kWh 10.4/kWh 13.8/kWh
Oncor
8.2/kWh 4.4/kWh 7.0/kWh 9.7/kWh 12.9/kWh
TNMP
8.6/kWh 5.0/kWh 7.8/kWh 10.6/kWh 14.1/kWh
Sources: PUC Historical Data, Bureau of Labor Statistics Inflation Calculator (33.0% inflation since December 2001); www.powertochoose.org offers as of January 2, 2017
January 2017 December 2001
Service Area
Average Fixed-Price Offer
(12-month term, no usage fees/credits)
Lowest Fixed-Price Offer
(12-month term, no usage fees/credits)
Lowest Variable Price Offer Available
Dec. 2001 prices, not adjusted for inflation
Dec. 2001 prices, adjusted for inflation
AEP Texas Central
9.4/kWh
5.0/kWh
7.9/kWh
9.6/kWh
12.8/kWh
AEP Texas North
9.4/kWh
5.6/kWh
7.9/kWh
10.0/kWh
13.3/kWh
CenterPoint Energy
8.8/kWh
4.8/kWh
7.8/kWh
10.4/kWh
13.8/kWh
Oncor
8.2/kWh
4.4/kWh
7.0/kWh
9.7/kWh
12.9/kWh
TNMP
8.6/kWh
5.0/kWh
7.8/kWh
10.6/kWh
14.1/kWh
Large Customers in the Market Have Among TheLowest Electricity Prices in the Nation
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Large industrial customers in the ERCOT market pay 23% less than
the national average for electricity
Source: Energy Information Administration data
Large Customers in the Market Have Among TheLowest Electricity Prices in the Nation
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Large commercial customers in the ERCOT market pay 28% less than
the national average for electricity
Source: Energy Information Administration data
Hot topics
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Ratemaking, Routing and Responding to Threats
Ratemaking: Two Basic Components of the Rate case
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Determination of Revenue RequirementsThe amount of gross revenues needed by a utility to cover its operating expenses, depreciation, taxes and other expenses
Determination of Rate StructureThe rates paid by each customer class to provide the necessary revenue as determined in the revenue requirements
1.
2.
Ratemaking: Statutory Timeline of a Rate Case
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Day 1 Day 185Day 35 Day 135
Utility files a statement of intent to file a rate case with Original Jurisdiction authorities (either its cities or the PUC). Original Jurisdiction authorities also have the authority to demand the utility file a rate case.
After the rate case is filed, the PUC may suspend the effective date of proposed rates by an additional 150 days beyond the notification period
After filing the rate case, PUC Staff, cities, affected ratepayer groups and OPUC may intervene and begin sending discovery requests to the utility.
Rate cases are almost always referred to SOAH, where an ALJ establishes a procedural schedule to allow the PUC to decide the case before the deadline.
Intervenors then file written testimony on the rate application. The utility may then file testimony rebutting intervenor testimony. About 70% of rate cases are settled without a hearing. If a hearing occurs, its
normally around 100 days after filing. The ALJ will issue a proposed order (if no hearing) or a proposal for decision (if
contested) and refer the case back to the PUC.
The PUC must approve or deny the case by day 185, or the case is deemed approved. The utility may voluntarily extend the timeline.
Ratemaking: Concerns Regarding Regulatory Lag
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By statute, a rate case is supposed to be processed in 185 days
The average time to process an electric rate case in Texas is one year
Since 1989:
30 out of 33 electric rate cases in Texas have exceeded the 185-day statutory deadline.
One-third of those took longer than 16 months to process.
Examples of Recent Rate Costs and Duration
Oncor Electric Delivery, Dockets 35717 & 36530 - $8.6 million (13 months)
Entergy Gulf States, Docket 34800 -$9.5 million (17 months)
AEP Texas, Dockets 33309, 33310 & 34301 - $6.4 million (13 months)
Southwestern Public Service Co., Docket 32766 - $5.6 million (14 months)
AEP Texas Central Co., Dockets 28840 & 31433 - $4.3 million (21 months)
Routing: Transmission Line Routing Process
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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 PUCs ruling, parties may appeal the decision
Brochure provided to landowners affected by a proposed transmission
line
Routing: Timeline of Transmission Line Construction
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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.
Routing: Eminent Domain Process
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LEGENDLO = Land OwnerED = Eminent DomainSC = Special Commissioner
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Threats: Resistance vs. Response
o Each of the varied facilities that comprise the electric grid face many threats to their reliable operation
o Utilities must weigh the risk and the likelihood of each threat and the most effective, appropriate response to limit outages
o The complexity of the electric grid is part of its strength, allowing for greater reliability and more effective recovery
o The focus of utilities is to quickly respond to each threat, by having protocols and replacement parts in place to recover critical systems
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Threats: Cyber Attacks and Magnetic DisturbancesAvoidance 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 and potential EMP attacks
o Investment: Major hardware and software investment specifically aimed at identifying activity by hackers or rogue states, plus investment in cyber security divisions staffed by employees 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, and determine best practices for hardening against magnetic disturbances
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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Threats: Recent ActivitiesResponse to Major Outage Threatso ERCOT Grid Resilience Working Group is currently assessing major threats and response strategieso GridEx is an industry-wide exercise assessing grid readiness in case of physical or cyber attacko DOE developed a draft National Transformer Strategy in 2015, which is under review by the Department
Protection against Technology Threatso PUC has opened a rulemaking specific to identifying technology and magnetic threats to the grido DHS Electric Sector Information Sharing and Analysis Center gathers industry information on cyber threats to
promote best practiceso DHS National Cyber and Communications Integration Center works with utilities; federal, state and local
governments; and law enforcement to assess and prepare for cyber threatso Utilities must comply with Presidential Policy Directive 21 on Critical Infrastructure Security and Resilienceo EEI Electricity Subsector Coordinating Council works with federal agencies to assess current activities and develop strategies to
reflect current threats
Mitigation of Magnetic Threatso PUC has opened a rulemaking specific to identifying technology and magnetic threats to the grido DOE and EPRI Joint Electromagnetic Pulse Resilience Strategy is ongoingo DHS EMP Protection Guidelines developed in 2014 o FERC GMD Reliability Standards Rulemaking Process is ongoingo DHS Solar Storm Mitigation forecasting, to be completed in coordination with NASA and NOAA in 2016 o NOAA, DHS and the White House Office of Science and Technology Policy report on improving response to geomagnetic
disturbances was released in 2015
Utilities, working with federal and state energy agencies, Constantly seek opportunities to improve coordination and preparation for all types of threat that could result in a major outage
key takeaways
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Competitive electricity price offers remain low, and customers have a wide array of choices
Ensuring utilities can recover their costs promotes investment in the grid and reliable electric delivery
Power line routing is determined through an effective stakeholder process at the PUC
Utilities, federal agencies and stakeholders continue to take significant steps to protect the grid from cyber attacks and acts of terrorism
How To Reach Us
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For background on electric markets, environmental data and Electricity 101
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The AECT App
Legislative Staff Briefing:Update on the Electric MarketAECT Companies within ERCOTAECT Companies Outside of ERCOTOverview of ERCOTThe ERCOT Competitive Retail Electric Market is Providing Customer BenefitsLower Prices Available Today thanBefore Competition BeganLarge Customers in the Market Have Among TheLowest Electricity Prices in the NationLarge Customers in the Market Have Among TheLowest Electricity Prices in the NationSlide Number 9Ratemaking: Two Basic Components of the Rate caseRatemaking: Statutory Timeline of a Rate CaseRatemaking: Concerns Regarding Regulatory LagRouting: Transmission Line Routing ProcessRouting: Timeline of Transmission Line ConstructionRouting: Eminent Domain ProcessThreats: Resistance vs. ResponseThreats: Cyber Attacks and Magnetic DisturbancesThreats: Recent Activitieskey takeawaysHow To Reach Us