Legislative Staff Briefing

1. Update on the Electric Industry in Texas:
Summer 2012 Recap
!
Legislative Staff Briefing!
September 20, 2012 !
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.
2

3. U.S. Divided into Eight!
Reliability Regions!
• The eight reliability regions in the FERC
continental U.S. are subject to the
oversight and enforcement authority of NERC
the North American Electric Reliability
Corporation (NERC), which is subject to
the Federal Energy Regulatory
Commission’s (FERC) oversight. NERC
is responsible for developing standards
to ensure and improve reliability for
delivery of electricity on the bulk power
system.
• Electric systems in Texas are located
within four separate reliability regions:
- Texas Reliability Entity (TRE),
which oversees participants in the
Electric Reliability Council of
Texas (ERCOT);
- SERC Reliability Corporation;
- Southwest Power Pool (SPP); and
- Western Electricity Coordinating
Council (WECC).
(ERCOT)
3

4. AECT Companies!
Within ERCOT!
Retail Electric Providers
Transmission and Distribution Utilities
Generation Companies
4

5. AECT Companies!
Outside of ERCOT!
SERC Reliability Corporation
Southwest Power Pool (SPP)
Western Electricity Coordinating
Council (WECC)
5

6. Summer 2012: !
ERCOT Reliability Update and!
Resource Adequacy!
6

7. Peak Demand in Texas on the !
Upswing!
340,000
Annual
Energy
and
Peak
Demand
70,000
335,000
Annual
Energy
Peak
Demand
68,379
330,000
68,000
319,097
320,000
65,776
66,000
312,401
307,064
308,278
310,000
305,715
64,000
63,400
299,227
300,000
62,339
62,174
62,000
62,188
GWh
MW
60,095
89,113
2
60,274
290,000
60,000
284,954
58,531
280,000
58,000
270,000
56,000
260,000
54,000
250,000
52,000
2003
2004
2005
2006
2007
2008
2009
2010
2011
Year
Source: ERCOT presentation at AECT legislative staff briefing, May 17, 2012 7

8. Resource Adequacy Concerns!
Over the Next Several Years!
Mid-Term Projections
2013 2014
MW.Currently.Installed.Resources 2015 2016
MW.under.Interconnection.Agreements 2020
2017 2018 2019 2021 2022
Coal.Projects.under.FIS
Coal Projects under FIS 0 0 0 0 0 850 850 850 850 850
Natural.Gas.Projects.under.FIS Other.Fuel.Projects.under.F IS Solar.Projects.under.FIS
Natural Gas Projects under FIS 89 1133 1733 1744 1744 1744 1744 1744 1744 1744
Wind.Pro jects.under.FIS 316
Other Fuel Projects under FIS 316 316 Forecast
316 316 316 316 Forecast.+.Reserve 316
316 316
Solar Projects under FIS 260
*.FIS.=.Full.Interconnection.Studies 441 481 481 481 481 481 481 481 481
95,000
Wind Projects under FIS 379 1005 1196 1227 1227 1227 1227 1227 1227 1227
MW under Interconnection Agreements 1106 1157 2664 4824 5484 6724 6724 6724 6724 6724
Source: ERCOT Capacity, Demand
MW Currently Installed Resources 73914 73933 73959 73933 74224 74160 73315 73315 73315 73315
Forecast and Reserves Report, May 22, 2012 65649 68403 71692 73957 75360 76483 76769 78524 79682 80694
Forecast + Reserve 74676 77808 81550 84126 85722 86999 87324 89321 90638 91790
90,000
85,000
80,000
75,000
70,000
65,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
• ERCOT reported sufficient capacity for Summer 2012, but concerns over the
next several years.
• CSAPR stay also impacted forecasts. 8

9. ERCOT and PUC Outreach on Need to
Conserve!
9

10. Additional Resources on Energy
Efficiency and Conservation!
• Customers in the ERCOT competitive retail electric market can
contact their retail electric provider or visit www.powertochoose.org
to learn more about available options.
• All customers can contact their electric company to find out what
programs are available, or to find a contractor or vendor who
participates in the state energy efficiency programs.
• Customers can also call 2-1-1, the Texas Health and Human
Services Commission's information and referral network, to learn
about programs available in the area.
• Additional resources
– Texas Department of Housing and Community Affairs:
www.tdhca.state.tx.us/assist_repair.htm
– U.S. Department of Energy: www.energy.gov/energyefficiency
– Get Energy Active: www.getenergyactive.org
10

11. Summer 2012 Has Again!
Been Warmer Than Average!
Summer Temperature Comparison (Austin) - Historical Average vs. 2012
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High Temperature
July
June
Aug
Average 2012
Source: Weather Underground 11

12. But With Few Exceptions Summer 2012!
Has Been Cooler Than Summer 2011!
Summer Temperature Comparison (Austin) - 2011 vs. 2012
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107
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High Temperature
July
June
Aug
2011 2012
Source: Weather Underground 12

13. ERCOT Fall Forecast Shows Sufficient
Capacity!
ERCOT Seasonable Assessment of Resource Adequacy
Includes installed capacity, capacity from private networks,
Total Resources 74,516 MW other sources and adjustments for effective capacity of
wind
Total Forecasted Peak Calculated based on data from the Climate Prediction
53,227 MW Center
Demand
Reserve Capacity 21,289 MW Resources minus Peak Demand
Includes power plant maintenance and unexpected plant
Range of Risks 8,601-17,998 MW outages
Range of Reserve Capacity
3,291-12,688 MW Reserve capacity minus risk
Beyond Risks
• “While it is always possible for unique conditions (such as much higher than
expected peak demands or higher than normal forced generation outages) to
occur that would require ERCOT to declare an Energy Emergency Alert (EEA),
ERCOT does not anticipate calling for rotating outages.”
13
Source: ERCOT Seasonable Assessment of Resource Adequacy, September 9, 2012

14. PUC Activity on Resource Adequacy!
• On June 28, 2012, the PUC voted to increase the system-wide
energy offer cap.
Power market lurches along, Higher electric costs
with peril dead ahead not justified
July 1, 2012 June 28, 2012
• While there were concerns that retail prices would be adversely
affected, offer prices available in the competitive market have
remained steady over the past seven weeks.
– From August 1 to September 17, the average 12-month fixed price offer fell
from
10.1¢/kWh to 10.0¢/kWh.
– The average lowest-available offer fell from 8.1¢/kWh to 6.9¢/kWh.
14

15. Summertime PUC and ERCOT Activity !
on Resource Adequacy!
• Open Meetings and Workshops on Resource Adequacy Projects:
June 13 and 28; July 13 and 30; August 8 and 17; September 6, 13 and
upcoming on September 28
• Brattle Report: Released June 1, provided analysis of five key
scenarios for consideration
• System-Wide Offer Cap: Raised by PUC and implemented by ERCOT
on August 1
• Power Balance Penalty Curve: Studied and adjustments considered
by PUC
• Demand Response and Load-Management Initiatives: Bolstered by
ERCOT
• Compensation for Reliability Unit Commitments: Addressed by
ERCOT
15

16. Resource Adequacy Options from!
The Brattle Group!
• The Brattle Group was asked to analyze
ERCOT’s options for increasing its ability
to attract electric generation and bolster
its reserve margin. It developed five key concepts, forming the basis of
discussion on the issue.
– Option 1: Current energy-only market
– Option 2: Energy-only market with adders to support a target reserve
margin
– Option 3: Energy-only market with a backstop procurement requirement to
meet minimum accepted reliability
– Option 4: Market in which load-serving entities contract for capacity to meet
a resource adequacy requirement
– Option 5: Capacity market to meet a resource adequacy requirement
16

17. Advanced Meter Deployments, !
New REP Products and !
Current Prices Available in the Market
!
17

18. Benefits of Advanced Metering
• Advanced meters and other new technologies
and associated infrastructure will provide information
and opportunities that will enable customers to better
understand the impact of controlling their energy
consumption.
• By controlling their energy consumption, customers
can better manage their bills and lessen their
environmental impact.
• Advanced meters will allow for more automation of utility functions such
as meter reading and connections/disconnections, which help to reduce
costs.
18

19. Advanced Metering Activities
in Texas
• The approved deployment plan for CenterPoint Energy calls for
installation of advanced meters over five years beginning in March
2009. In 2009, CenterPoint Energy received a Federal Smart Grid
Investment Grant that enabled the deployment to be completed in
2012. CenterPoint completed installation of approximately 2.2 million
meters throughout its service territory in mid-2012.
• Oncor’s approved deployment plan initiated in late 2008 will have
installation of advanced meters completed by the end of 2012. As of
August 31, 2012, Oncor has installed over 3 million meters.
• The AEP Texas deployment plan was approved in December 2009 and
installation of advanced meters will be completed by the end of 2013.
Over 600,000 meters have been installed as of August 31, 2012.
• TNMP began installation of advanced meters in September 2011. As of
August 31, 2012, over 57 thousand have been installed. 19

20. Advanced Meters Have been!
Proven to be Accurate, Safe and Reliable
• Accuracy: Advanced meters are rigorously tested and must be independently
certified to prove their measurements are accurate. In fact, repeated tests
confirm that advanced meters are often more accurate than analog meters.
• Beneficial: Increased reliability, restoration after a power outage, remote meter
reading are among the immediate cost-savings for advanced meters.
• Secure: Advanced meters are a technological leap, much like cell phones and
other evolving industries. Utilities use advanced encryption technology to
safeguard consumer data.
• Safe: Digital meter radio frequency (RF) emissions are well below FCC
standards and are minimal compared to the RF emissions of many commonly
used household devices. The extensive scientific literature reflects that there is
no credible evidence of negative health impacts from the low level of RF
emissions from digital meters.
• Private: Utilities adhere to strict policies, following Texas laws that regulate the
use of personal information for business functions like billing and customer
service.
20

21. Smart Meters in Action:!
Reliant e-Sense Plans and Products!
• Keep Your Cash Nights & Weekends plan - All electricity used on
weeknights from 8 p.m. and 8 a.m. and all weekend long is discounted.
• Time-of-Use plan -- Customers receive a lower price during off-peak hours.
Higher-priced Summer Peak hours are only 3% of the total hours in the year.
By minimizing usage in this period, a customer can maximize savings.
• Reliant’s Learn & Conserve PlanSM featuring the Nest Learning
ThermostatTM – Nest learns customer preferences and even
adjusts itself when the customer is away, or allows remote adjustment
via mobile app, so electricity isn’t wasted cooling an empty home.
• Degrees of Difference – participants receive optional requests to conserve
when high electricity demand is anticipated; customers who use less during the
requested conservation hours receive a credit on their next electricity bill.
• Reliant also offers information between monthly bills, via home energy monitor,
weekly summary e-mail, text alerts, and mobile app
21

22. Smart Meters in Action:!
TXU Energy’s Innovative Plans & Products!
• TXU Energy Free Nights plan
- Customers pay nothing for Energy Charges at night (10 pm – 6 am).
- Customers receive ~25% of their Energy Charges for free1
- Guaranteed price protection for a full 12, 18 or 24 months
• TXU Energy MyEnergy DashboardSM
- A web-based information service that helps customers better
understand how and when they use electricity so they can reduce
usage and save money on electricity bills
- A free service available to all TXU Energy customers
®
• Brighten iThermostat
- A touch-screen programmable thermostat that helps customers
monitor and manage their home's temperature via the Internet
- Customers also participate in the Brighten® Conservation Program,
which allows air conditioner cycling during high demand periods
• A sampling of other TXU Energy programs and services:
- Personalized electricity usage reports and budget alerts
- Personal energy advisor for energy-saving tools, tips, and projects
- Account access and compare bills/usage through iPhone or Android apps
1
Estimated savings based on average Texas household’s annual electricity usage between 10 p.m. and 6 a.m.. Results will vary depending on actual usage.
22

23. Price Offers Remain Low in the ERCOT
Competitive Market
September 2012 December 2001
Average Fixed- Lowest Fixed-Price Lowest Price Dec. 2001 prices, Dec. 2001 prices,
Service Area Price Offer Offer Offer not adjusted for
adjusted for inflation
(12-month term) (12-month term) Available inflation
AEP Texas Central 10.6¢/kWh 9.4¢/kWh 7.4¢/kWh 9.6¢/kWh 12.2¢/kWh
AEP Texas North 9.8¢/kWh 8.1¢/kWh 7.0¢/kWh 10.0¢/kWh 12.7¢/kWh
CenterPoint
Energy
10.2¢/kWh 9.1¢/kWh 6.9¢/kWh 10.4¢/kWh 13.2¢/kWh
Oncor 9.4¢/kWh 8.0¢/kWh 6.1¢/kWh 9.7¢/kWh 12.4¢/kWh
TNMP 10.0¢/kWh 8.1¢/kWh 7.0¢/kWh 10.6¢/kWh 13.5¢/kWh
Sources: PUC Historical Data, Bureau of Labor and Statistics, www.powertochoose.org offers as of September 17, 2012 23

24. Environmental Update!
24

25. Other Factors: !
Federal Environmental Regulation!
• On August 21, a federal court vacated the Cross-State Air
Pollution Rule (CSAPR), which would have required generation
units to significantly reduce emissions on a short time frame.
- CSAPR would have impacted the ability of many coal-fired generation units
in Texas to operate, creating additional resource adequacy concerns.
• On September 13, a federal court agreed to hold in abeyance
challenges to the EPA's Mercury and Air Toxics (MATS)
standards while the agency reconsiders parts of the rulemaking.
• Meanwhile, as subsequent slides show, Texas generators
perform well in comparison with the nation as a whole.
25!

26. Texas’ Electric Generating Plants Among
Cleanest NOx Emitters in the Nation!
0.7
0.6 Texas has the 12th
cleanest average
NOx emissions rate
0.5
NOx (lb/MMBtu)
0.4
0.3
U.S. Average
0.2 Outside Texas
0.161 lb/mmBtu
0.1
0
IL
AL
FL
UT
MT
VT
CT
WV
SD
ND
NE
DC
KS
CO
IN
MO
MD
MS
NC
WI
TN
DE
SC
NJ
ID
ME
RI
OK
OH
NH
NV
MI
NM
MN
AR
OR
CA
PA
WA
AZ
LA
TX
VA
WY
IA
KY
GA
NY
MA
26!
Source: 2011 EPA Air Markets Program Database, Acid Rain Program Only

27. Texas’ Electric Generating Plants Among
Cleanest SO2 Emitters in the Nation!
1
0.9
Texas’ SO2
0.8 emissions rate is
well below the
SO2 (lb/MMBtu)
0.7
national average
0.6
0.5
U.S. Average
Outside Texas
0.4 0.365 lb/mmBtu
0.3
0.2
0.1
0
IL
AL
FL
WV
MT
UT
CT
VT
NV
OH
DC
SD
IN
NH
ND
MI
TN
NE
MO
WI
DE
SC
OK
MD
MS
NC
KS
CO
ME
ID
MN
NM
RI
AR
OR
WA
TX
LA
AZ
VA
NJ
WY
IA
KY
GA
NY
MA
CA
PA
27!
Source: 2011 EPA Air Markets Program Database, Acid Rain Program Only

28. Web: AECT.net
Blog: AECTnet.wordpress.com
Twitter: @AECTnet
Facebook: AECT Advocacy
Email: info@aect.net
28!