1. Transmission Policies in Texas
Legislative Staff Briefing!
January 27, 2011 !
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.
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3. Overview of the Electric Market in
Texas!
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4. 4 4

5. ERCOT: Separate companies provide
retail, transmission & distribution and
generation services!
Power Flow
Financial Flow
Regulated
• In competitive markets, 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. 5

6. ERCOT: Separate companies provide
retail, transmission & distribution and
generation services!
Power Flow
Financial Flow
Regulated
• Because wholesale electric prices are set by the competitive market, the
risks associated with the cost of construction, operations and maintenance
of a generation plant are borne entirely by the generator and its investors,
not by end-use customers.
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7. 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 competitive entities. 7

8. Outside ERCOT: A single company
provides retail, transmission & distribution
and generation services in each area!
Power Flow
Financial Flow
Regulated
• New power plants in these regions can be built by both regulated entities
and certain competitive entities or qualifying facilities.
• Regulated utility power plants, however, must be approved by the PUC
after a rigorous review of need and siting.
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9. ERCOT Generation Mix
Compared to U.S. Average!
ERCOT U.S. Average
Other Petroleum
Energy (MWh)
Wind Renewable
8% 1% (Mostly Hydro) 1%
Natural Gas
Nuclear 9% 21%
Nuclear
13%
38% 20%
40%
Natural Gas
48%
Coal
Coal
Other
Wind Oil
2%
Renewable
11% (Mostly Hydro) 6%
Capacity (MW)
Nuclear Natural Gas
6% 14%
39%
22% Nuclear 10%
Coal
59%
31%
Natural Gas
Coal
Note: Oil-fired generation is negligible in ERCOT, accounting for less than 0.1% of ERCOT capacity and load; numbers may not add
up to 100% due to rounding.
Sources: ERCOT (2010 data) 9

10. Lower inflation-adjusted prices available
today than before competition began
Sources: PUC Historical Data, Bureau of Labor and Statistics, www.powertochoose.org offers as of January 19, 2011 10

11. Overview of Texasʼ Transmission
Policies
!
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12. Source: www.nerc.com
The “grid” can be broken down in to four main components:
Generation, Transmission, Distribution, and Customers.
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13. • Serves as the “interstate highway
system” for electricity
• Used to move power long
distances from generators to load
• Strategically interconnected to
enhance grid reliability
• Key infrastructure in supporting
electric markets
• Critical component for Texas’
economic and energy leadership
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14. Before… Investor Owned Utility (IOU)
Gen. T&D* Customer
Interface
After (2002)…
Transmission
Generator Retailer
& Distribution
Competitive Regulated Competitive
Municipals &
Cooperatives
Option to Opt-in
* Transmission and Distribution
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15. Transmission’s Role in the
Competitive ERCOT Market
• Provide reliable delivery of electricity on a 24-7 basis
• Invest in and build infrastructure to support the
needs of Texas’ growing economy
• Manage operation and planning of their networks
under the direction of ERCOT
• Quickly respond to outages (e.g., storms, natural
disasters) and restore service
• Support operations of Texas’ competitive market
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16. 4 Key Transmission Policies in
Texas
• Open-access - affords all generators the right to access
and deliver energy across the transmission network
• Postage stamp tariff – levelizes costs, since we all benefit
from the investment
• Transmission Cost of Service (TCOS) - implemented to
support much needed investment in the grid and provide
timely recovery of investment
• ERCOT Regional Planning Process - evaluates need for
and coordinates planning of new transmission by
numerous market participants
The marketplace is strengthened by providing legal and regulatory stability
which serves to increase investment.
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17. Benefits of Texas’ Transmission
Policies
 Stimulated generation investment
 50,689 MW since 1995 – over 70% natural gas
 Stimulated transmission investment
 More than 8,000 miles since 19991
 Benefits afforded to all Texans including:
• economic benefits of increased reliability
• lower energy costs from reduced congestion
• lower prices associated with diverse fuel mix
1ERCOT, "ERCOT Releases Annual Transmission Planning Reports," December 30, 2010 17

18. CREZ – Consistent with
Policies and Benefits
• Open-access
• Postage stamp tariff
• Transmission Cost of Service
• ERCOT Planning
• Benefits
• Legislature increased RPS; ordered CREZ designation and
transmission
• PUC reports estimated savings of $38/MWh for wind power and
lower congestion costs of $2.9B*
• ERCOT stated it is capable of integrating wind-generated
electricity without sacrificing system stability and reliability*
* PUC Project 33672 18

19. Transmission in Texas - outside
of ERCOT
• Open access transmission rights subject to Federal
Energy Regulatory Commission (FERC) jurisdiction.
• FERC transmission pricing reflects location of
generation.
• FERC requires generators to bear higher cost relative to
the ERCOT system of connecting with the transmission
grid.
• Certification in Texas is with the PUC.
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20. • The competitive electricity market in Texas is
strengthened by stable legal and regulatory policies
• Stable legal and regulatory policies promote
transmission investment in Texas’ grid
• The electric grid is the indispensable engine of Texas’
growing economy, which will increasingly rely upon an
advanced network.
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21. Web: AECT.net
Blog: AECTnet.wordpress.com
Twitter: twitter.com/AECTnet
Facebook: Association of Electric Companies of
Texas, Inc.
Email: info@aect.net
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