Update on the Texas Electric Industry: Preparing for Summer

Update on the Texas Electric Industry:

Preparing for Summer

Legisla)ve Staff Briefing

May 15, 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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Opportuni)es for Retail Customers

Generators Prepared for Heat

Hurricane Season Begins in June

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Texas Summers Are Long And Hot

•  When temperatures rise, electricity consump)on and customer bill amounts tend to increase

•  Even if thermostats are set at a constant temperature, as it gets hoHer outside the A/C must work harder to keep up and therefore uses more electricity

•  Strong PUC customer protec)on rules are in place to help customers during the hot Texas summer

•  Con)nued customer educa)on, empowerment, and choice are key

5/19 5/26 6/2 6/9 6/16 6/23 6/30 7/7 7/14 7/21 7/28 8/4 8/11 8/18 8/25

May June July August

86

96-‐99

87

96-‐104

89

98-‐103

91

100-‐105

92

102-‐105

93

102-‐112

95

104-‐108

95

105-‐110

96

104-‐110

97

104-‐111

97

107-‐111

97

107-‐110

97

105-‐108

96

104-‐108

95

104-‐108

North Texas Historical Weather Data

Average high

Record high

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May 2014

Lower Prices Available Today than Before Compe))on Began

Sources: PUC Historical Data, Bureau of Labor Statistics - Consumer Price Index (34% inflation since December 2001), www.powertochoose.org offers as of May 1, 2014

December 2001

While ERCOT compeOOve offers have dropped significantly, the latest average U.S. residenOal electricity prices are up 43% since 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

11.8¢/kWh 9.6¢/kWh 8.4¢/kWh 9.6¢/kWh 12.8¢/kWh

AEP Texas North


CenterPoint Energy


Oncor


TNMP


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Retail Electric Providers (REPs) Launched Solu)ons Designed To Address Common Customer Inquiries During The Summer

Retail electric providers deliver summer soluOons to customers that are tailored to their needs, building on the PUC’s strong customer protecOon rules

Customer Inquiry Category Sample SoluOons Offered by REPs

Electricity Usage

•  Energy Efficiency Tips •  Energy Management Alerts (e.g., Budget/Usage Reports) •  Online/Mobile Account Access •  Time of Use Plans

Bill Amount and Components

•  Average Price per kWh Informa)on •  Transmission Distribu)on U)lity Charges Informa)on

Bill Payment Assistance

•  System Benefit Fund for Low Income Customers •  Average Monthly Billing •  Deferrals •  Installment Plans •  Texas 211 •  Agency Assistance

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Energy Efficiency Tips

•  Raise temperature sebng on thermostat

•  Use ceiling fans in the “down” mode to help keep cool

•  Check HVAC air filter

•  Check insula)on

•  Change light bulbs to compact fluorescents

•  Caulk and weather-‐strip all doors and windows

•  Make sure fireplace damper is closed when not in use

•  Keep shades and curtains closed during the day

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ERCOT Reports Sufficient Power Expected For Summer 2014

•  ERCOT released its Seasonal Assessment of Resource Adequacy (SARA) on May 1.

•  ERCOT found that ERCOT does not expect periods of limited capacity.

–  However, ERCOT notes in the SARA that “If an extreme system peak occurs…[condi)ons] could result in an Energy Emergency Alert (EEA), with corresponding public appeals for conserva)on. Depending on the severity of the situa)on and the amount of genera)on available during periods of highest demand, ERCOT could take other progressive steps necessary to protect overall system.”

•  According to ERCOT’s meteorologist, most of the state should not expect temperatures hoHer than last summer.

–  While not as hot as last summer, temperatures are likely to be above the long-‐term historical average in Texas.

–  July is expected to be hoHest, especially affec)ng Aus)n, San Antonio and the Valley.

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Longer-‐Term Outlook for ERCOT Shows Genera)on Investment S)ll Needed

Source: ERCOT, 2015 Report on the Capacity, Demand and Reserves in the ERCOT Region, May 2014

65000$

70000$

75000$

80000$

85000$

2015% 2016% 2017% 2018% 2019% 2020% 2021% 2022% 2023% 2024%

MW%

ERCOT%Summer%Resources%and%Firm%Load%Forecast:%2015C2024%

Resources%

Load%Forecast%

Reserve%Margin%14.3%%

14.1%%13.8%%

12.3%% 9.8%%8.4%%

3.5%%

6.1%%7.4%%

4.8%%

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Opera)ng Reserve Demand Curve To Enhance Efficiency in Scarcity Pricing A Cri)cal Step to Any Future Market Design

•  The objec)ve of an ORDC (opera)ng reserve demand curve) is to improve the efficiency and accuracy of energy and reserves pricing as opera)ng reserves (that are immediately available to ERCOT to manage the grid in real-‐)me) are depleted and the risk of involuntary load curtailment increases.

•  ORDC accomplishes its objec)ve by administra)vely adjus)ng prices for energy and reserves to approximate the real cost of customers losing power.

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Drought Update and Available Water Resources For Power Plants

•  Most electric generators require the use of water for system cooling. •  The vast majority of this water is returned to its source – typically a

reservoir built by the power plant owner.

•  Drought condi)ons remain in much of Texas, but the electricity system has remained reliable.

Source: United States Drought Monitor – April 29, 2014

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Water Usage In the Average Household

•  To put water use for electricity into perspec)ve, only about 3 percent of water use in the average household is for electric produc)on.

Source: “Viability and Impacts of Implementing Various Power Plant Cooling Technologies in Texas,” Electric Power Research Institute, 2012

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Electric Generators Prepared for Summer Heat

•  Electric generators prepare facili)es for opera)ons during the summer through rou)ne maintenance, which typically occurs during March and April. –  Maintenance includes assessment of physical components of the power plant

to ensure con)nued opera)on whenever possible. –  Given Texas’ hot climate, power plants are designed specifically for opera)on

during the summer.

•  Summer readiness programs are focused on safety, evalua)on of problem areas, tes)ng, training and communica)ons. –  The immediate goal is reliable opera)on of power plants, including “peaker”

plants used during )mes of peak demand, such as the anernoon of a hot summer day.

–  Procedures are also in place to ensure the grid operator – such as ERCOT – is no)fied of offline power plants, to allow for procurement of needed genera)on.

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“Quiet” Hurricane Season Predicted

•  Hurricane season runs June 1 through the end of November.

•  Researchers at Colorado State University predict a “quiet” 2014 hurricane season, although the official forecast for the season from the Na)onal Oceanic and Atmospheric Administra)on (NOAA) will not be available un)l closer to June.

•  El Niño condi)ons over the Pacific Ocean and cooler water temperatures in the Atlan)c Ocean are two factors that are expected to result in fewer storms than normal.

2013 Tropical Storm AcOvity

•  Electric service providers monitor weather threats around the clock and remain in a state of readiness.

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U)li)es Prepared for Storm Response

•  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 aner actual ac)va)ons of their emergency plans and make revisions based on lessons learned in order to beHer prepare for future emergency events.

•  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 )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.

•  U)li)es are preparing for outages before they happen by inves)ng in technology to more quickly and accurately pinpoint problems.

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Electric infrastructure

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Con)nued Transmission and Distribu)on Investment Needed Throughout Texas

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

•  From October 2012 to September 2013, u)li)es completed $4.0 billion in transmission projects, including $3.04 billion related to the CREZ project.

•  The total includes the addi)on or upgrade of 4,156 miles of transmission circuits, among other projects.

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

Source: ERCOT, “Report on Exis+ng and Poten+al Electric System Constraints and Needs,” January 2012 (map) and December 2013 (text)

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Distribu)on Investment Also Needed

•  The need to replace an aging distribu)on infrastructure to meet popula)on and demand growth will require con)nued investment.

•  It is becoming more evident that rising construc)on material costs are an increasingly important driver contribu)ng to the higher actual and planned u)lity industry infrastructure investments.

•  Na)onwide, distribu)on investment is expected to be almost triple the size of projected transmission spending, according to the Edison Electric Ins)tute. Distribu)on investment is likely to exceed genera)on and environmental capital spending, as well.

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Distribu)on Infrastructure Terms

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Remember – no two storms

are alike •  Specific damage to electric system will be different.

•  It is not possible to forecast in advance what the exact damage to the electric system will be, so…

•  It is not possible to give precise outage duraOon esOmates for individual locaOons in advance.

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•  Goal – restore power to the largest number of people in the shortest amount of )me quickly and efficiently

•  Approach: •  All electric distribu)on facili)es

that did not sustain damage are energized

•  Simultaneously assess damage

•  Damaged electric lines are repaired beginning at the substa)on and then proceeding outward toward the ends of the lines

•  Individual services lines that are damaged receive a lower priority for restora)on un)l the major parts of the distribu)on system are repaired

Systema)c Power Restora)on

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Mutual Assistance

•  Mutual Assistance is a na)on-‐wide program of electric u)li)es willing to safely support other electric u)li)es during major events on a not for profit basis.

•  Groups of U)li)es have organized by Regions and have formed Regional Mutual Assistance Groups.

•  They voluntarily help each other restore electric service aner major events, such as ice storms, hurricanes, tornadoes, or floods.

•  They provide a rapid, scalable and effec)ve response of labor and equipment.

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Hurricane Ike Mutual Assistance

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•  8,500 out of more than 1 million wood distribu)on poles

•  300,000 n. of wire & cable out of approximately 140 million n.

•  4,000 transformers out of 400,000

•  860,000 meals

Hurricane Ike Logis)cs Resources

•  More than 1 million gallons of fuel for 7,000 vehicles

•  2 million lbs. of ice

•  94,000 hotel room nights

•  5,000 + cots system-‐wide

•  More than 11,000 mutual assistance crews from 35 states and Canada

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Pre-‐storm: Electric service )ps

•  Unplug sensi)ve electrical appliances, such as computers and TVs.

•  If you expect flooding, turn off electricity at the circuit breaker.

•  If someone depends on electricity for life-‐sustaining equipment, you need to make alternaOve arrangements for them in advance.

MAIN

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Post-‐storm: Electric safety )ps

•  DO call your uOlity to report a downed power line or other electric emergencies

•  Always stay away from power lines! •  Stay away from standing water;

energized power lines could be submerged.

•  Treat all downed lines as if they are energized.

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Electric Weatherhead

•  Check your home’s weatherhead.

•  Any weatherhead problems will need to be repaired by an electrician prior to service being restored.

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In Summary

•  U)li)es plan year round for hurricanes.

•  Hurricanes present logis)cal challenges for the u)lity.

•  U)lity workers and mutual assistance crews work well together to restore service safely and efficiently.

•  U)lity customers should prepare for outages las)ng 2 to 4 weeks, or more, depending on the severity of the storm.

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Web: AECT.net Twitter: twitter.com/AECTnet Facebook: AECT Advocacy Email: [email protected]

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Update on the Texas Electric Industry: Preparing for Summer