Electricity 101: The Electric Industry in Texas

Transcription

1 Electricity 101: The Electric Industry in Texas July 2015 Legisla;ve adver;sing paid for by: John W. Fainter, Jr. President and CEO Associa;on of Electric Companies of Texas, Inc Congress, Suite 600 Aus;n, TX phone fax

2 AECT Principles AECT is an advocacy group composed of member companies commited 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 commited 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 2

3 AECT Companies Within ERCOT Retail Electric Providers Transmission and Distribu;on U;li;es Total ERCOT Capacity: >74,000 MW Genera;on Companies 3

4 AECT Companies Outside of ERCOT Midcon;nent Independent System Operator (MISO) Southwest Power Pool (SPP) Total ERCOT Capacity: >74,000 MW Western Electricity Coordina;ng Council (WECC) 4

5 Contents Slide 6: Electric Market Structures in Texas Slide 11: Texas Wholesale Electric Market Slide 22: Emissions and the Environment Slide 30: Water Use by Electric Generators Slide 40: Transmission and Distribu;on U;li;es Slide 49: Energy Efficiency Slide 55: Compe;;ve Retail Electric Market in ERCOT APPENDICES Slide 64: Appendix A: History of Electric Regula;on in ERCOT Slide 73: Appendix B: AECT Member Companies 5

6 Electric Market Structures in Texas 6

7 ERCOT: Separate companies provide retail, transmission & distribu;on and genera;on services Power Flow Financial Flow Regulated In compe;;ve markets, consumers have mul;ple retail electric providers (REPs) and service plans to choose from. Wholesale and retail prices are set by compe;;ve market forces, while the PUC sets transmission and distribu;on rates. 7

8 ERCOT: Separate companies provide retail, transmission & distribu;on and genera;on services Power Flow Financial Flow Regulated Because wholesale electric prices are set by the compe;;ve market, the risks associated with the cost of construc;on, opera;ons and maintenance of a genera;on plant are borne en;rely by the generator and its investors, not by end- use customers. 8

9 Outside ERCOT: A single company provides retail, transmission & distribu;on and genera;on 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 mul;- state electric grids, with differing regula;ons. In many cases, ver;cally integrated u;li;es purchase wholesale power from certain unregulated en;;es. 9

10 Outside ERCOT: A single company provides retail, transmission & distribu;on and genera;on services in each area Power Flow Financial Flow Regulated New power plants in these regions can be built by both regulated en;;es and certain unregulated en;;es or qualifying facili;es. Regulated u;lity power plants, however, must be approved by the PUC afer a rigorous review of need and si;ng. 10

11 Texas Wholesale Electric Market 11

12 The Compe;;ve Wholesale Market: A Success Story CompeLLon has brought greater efficiency to the wholesale market Generators shoulder the risk of building new power plants, bringing efficient, cost- effec;ve genera;on to consumers. New power plants produce more electricity per unit of fuel. New power plants include modern environmental emissions controls. The compellve market is in the public interest Opera;onal efficiency of a compe;;ve market helps push wholesale prices downward. No market structure is more effec;ve at ensuring efficient opera;ons than a compe;;ve one. Policy decisions should be focused on maintaining vibrant compellon Texas leaders should support policies that maintain the compe;;ve market. The compe;;ve market will bring forward the right mix of technology and fuel type based on environmental choices by policymakers. 12

13 PermiTed and Opera;ng Electric Genera;ng Units in Texas 13

14 ERCOT Genera;on Mix Compared to U.S. Average Capacity (MW) Energy (MWh) Wind 11% Nuclear 12% 36% Coal Wind Nuclear 14% 6% Coal 24% ERCOT 1% 1% Other 41% Other 55% Natural Gas Natural Gas Nuclear U.S. Average Hydro Other (Mostly Petroleum) Non- Hydro Renewables (Mostly Wind) 7% 1% Natural Gas 6% 27% 19% Hydro Non- Hydro Renewables 7% (Mostly Wind) 7% Nuclear Coal 9% 29% 39% 42% Coal Other (Mostly Petroleum) 5% Natural Gas Note: Oil- fired genera+on is negligible in ERCOT, accoun+ng for less than 0.1% of ERCOT capacity and load; numbers may not add up to 100% due to rounding. Sources: ERCOT (2014 data for energy; 2015 data for capacity); EIA (2013 data for energy, 2012 data for capacity) 14

15 Gas on the Margin in ERCOT Nearly Year- Round Typical August GeneraLon Output Source: ERCOT Because of their lower marginal costs, nuclear and coal- fired power plants in ERCOT operate approximately 90 percent of the ;me Some natural gas- fired genera;on operates at nearly all ;mes to meet demand Peaking natural gas- fired power plants are ramped on and off, depending upon demand Wind- generated electricity is only intermitently available, depending on wind condi;ons. 15

16 Texas Has the Most Installed Wind Energy Capacity States With Most Installed Wind Capacity (MW) TX CA IA OK IL OR WA MN KS CO Source: American Wind Energy Associa+on, Through Q % of the nalon s installed wind generalon capacity is located in Texas. 16

17 ERCOT Wholesale Market Management System Reliability ERCOT oversees system reliability. ERCOT is part of nalonal reliability council. ERCOT protocols, approved by PUC, mandate system reliability standards that all market parlcipants must follow. Statute and Rules Address Market Power and GeneraLon Merger Issues Independent Market Monitor oversees wholesale market operalons. GeneraLng capacity owned and controlled by a Power GeneraLon Company limited to 20% of installed generalng capacity capable of delivering power to a power region. AdministraLve penalles for market power abuse were reviewed and updated during the 79 th Regular Session. Mergers of Power GeneraLon Companies subject to PUC review. Market Design ERCOT transiloned to a Nodal Market in 2009 as a result of PUC rulemaking. The change is expected to bring cost- savings and addilonal efficiency to the market by enhancing market transparency and allocalng costs more accurately to market parlcipants. 17

18 Wholesale Market Management Outside ERCOT System Reliability Larger, mull- state Councils (MISO, SPP, WECC) oversee system reliability. Each is part of nalonal reliability council. Protocols, approved by the Federal Energy Regulatory Commission (FERC), mandate system reliability standards that all market parlcipants must follow. Wholesale market operalons overseen by FERC 18

19 Increased Popula;on Drives Future Electric Consump;on Texas Projected PopulaLon Growth (millions) To meet increases in electric load created by Texas rapid popula;on and economic growth, Texas will require addi;onal power, transmission and distribu;on, customer demand response and energy efficiency million 14.2 million 20.9 million 25.1 million 28.9 million 32.9 million 37.0 million Sources: U.S. Census, Texas State Data Center 0.5 scenario 19

20 ERCOT Reports Sufficient Power Expected For Summer 2015 ERCOT released its Seasonal Assessment of Resource Adequacy (SARA) on May 1. ERCOT does not expect periods of limited capacity on the grid. According to ERCOT s meteorologist, most of the state should not expect temperatures hoter than last summer. Texas should expect fewer 100- degree days than other recent summers. 20

21 Long- Term Outlook for ERCOT Genera;on 85000$ ERCOT%Summer%Resources%and%Firm%Load%Forecast:%2016C2025% MW% 80000$ 75000$ 17.0%% 18.5%% 21.4%% 18.7%% 17.1%% 16.1%% 14.6%% 13.2%% 11.8%% 10.4%% Resources% Load%Forecast% Reserve% Margin% 70000$ 65000$ 2016% 2017% 2018% 2019% 2020% 2021% 2022% 2023% 2024% 2025% Source: ERCOT, 2015 Report on the Capacity, Demand and Reserves in the ERCOT Region, May

22 Emissions and the Environment 22

23 Texas is Among Na;onwide Leaders in Low Emissions Rates States With NOx, SO2 and CO2 Emissions Rates Below the NaLonal Average for Electric GeneraLon Source: EPA Air Markets Program Data (2014) 23

24 Comparison of Electric U;lity Genera;on Emissions: Texas vs. the Northeast 13 Northeast States Texas Land Area 247,175 mi 2 261,232 mi 2 Short Tons of CO 2 412,349, ,189,583 Tons of SO 2 724, ,405 Tons of NO x 333, ,487 Sources: CO 2, NO x, SO 2 : EPA Air Markets Program Data (2014); Land Area: US Census Bureau,

25 Texas Electric Genera;ng Plants Remain Among Cleanest NO x EmiTers in the Na;on Source: EPA Air Markets Program Data (2014) 25

26 Texas is Already Leading the Way in Clean Power Plants Regionally Texas electric generators have the lowest rate of NOx emissions in the region NM OK AR TX LA Area 2014 NO x Emission Rate Averages (lbs/ mmbtu) Na;onal Source: EPA Air Markets Program Data (2014) Texas

27 Texas Electric Genera;ng Plants Below Na;onal Average SO 2 Emissions Rates Source: EPA Air Markets Program Data (2014) 27

28 Texas Electric Genera;ng Plants Also Below Average CO 2 Emissions Rates Source: EPA Air Markets Program Data (2014) 28

29 Selected Environmental Programs and Fees The electric industry is among the most heavily regulated in the na;on, complying with hundreds of regula;ons and paying millions of dollars in fees annually. Selected Current Environmental Programs - Compliance with Na;onal Ambient Air Quality Standards - State Implementa;on Plan - NO x reduc;ons for electric genera;ng units - Clean Air Interstate/Clean Air Mercury Rules - New Source Review (NSR) Preven;on of Significant Deteriora;on - Non- atainment NSR, including offset - State Minor NSR - Title V and Acid rain permits - Compliance Assurance Monitoring - Con;nuous Emissions Monitoring Systems - Toxic Release Inventory - Monitoring cooling water - Mass Emission Cap and Trade Program Selected Current Environmental Fees - Title V federal opera;ng permit fees - Air inspec;on fees - Air quality permit fees - Air quality permit renewal fees - Wastewater inspec;on fees - Wastewater permit applica;on fees - Water quality fees - Potable water fees - Water use permit applica;on fees - Hazardous waste genera;on fees - Non- hazardous waste fees - Low level radioac;ve waste fee - Injec;on well fee 29

30 Water Use by Electric Generators 30

31 Overview of Water Use by Electric Generators in Texas AECT member companies represent the largest private owners, builders, and operators of private reservoirs in Texas. Dependable water supplies are essen;al to the reliable genera;on of electricity. Water supply is generally obtained in the form of water contracts/rights, prior to the construc;on of an electric genera;on sta;on. Water contracts/rights are secured at a level to ensure a reliable water source during future drought periods. It is important to note that most of this water is not consumed: water consumed for electric genera;on is currently 4% of total Texas water demand. The reliable genera;on of electricity is necessary for pumping water to ci;es and farms, and for water treatment and sewage treatment among other necessi;es. Moreover, a reliable Texas electricity industry is necessary for the state to meet the needs of our growing popula;on and the new and growing businesses that fuel our state s economy. 31

32 How Texas Steam Power Plants Use Water Steam Flow of H 2 O Water CombusLon Controls Stack Fuel Pump Turbine Generator Transformer Flow of H 2 O Flow of Power Electricity Condenser Cooling Water The graphic above is a simplified example of a power plant s use of water for steam genera;on. Most power plants heat water in a closed system un;l it becomes steam, then pressurize that steam to turn a genera;ng turbine. The steam is then routed to a condenser, where the water is condensed and reused in the steam cycle. 32

33 Management and Use of Water at Texas Power Plants Many electric genera;ng facili;es in Texas obtain TCEQ permits for use of fresh surface water or surface saltwater as well as groundwater conserva;on district permits for well water withdrawals. Electric genera;ng facili;es in Texas are required to obtain TCEQ permits for their wastewater discharge. AECT member companies have an outstanding record of compliance with state and federal water quality standards and requirements, which includes rigorous monitoring of the wastewater discharge In addi;on to complying with state and federal water quality regula;ons, AECT member companies are commited to prac;cing sound water conserva;on. We: Reuse water whenever possible Capture storm water runoff Restore, enhance and create aqua;c habitats Preserve ecosystems Enhance and create valuable wetlands Many reservoirs created by electric genera;ng companies are used for recrea;onal purposes, including camping, boa;ng, fishing and swimming. 33

34 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. As of July 2015, drought condi;ons have subsided in Texas. The system remained reliable during recent droughts. Source: United States Drought Monitor July 21,

35 Water Usage In the Average Household About 3 percent of water use in the average household is for electric produc;on. Source: Viability and Impacts of Implemen;ng Various Power Plant Cooling Technologies in Texas, prepared for EPRI by Texas A&M University, July

36 Key Findings On Water Use in Texas The typical American household consumes 300 gallons of water each day. Producing the electricity consumed by that household requires only about 9½ gallons. Only about 3% of an average resident s total daily consump;on of electricity is needed to take care of all of daily water needs. This includes pumping the raw water from the ground or lake, pumping it to a treatment plant and trea;ng it, delivering the treated water to the resident and trea;ng the resul;ng wastewater. EPRI s Water Conserva;on & Technology Center report supports once- through cooling used on the majority of fossil fuel- fired power plants today, finding that Manda;ng one cooling technology may result in job losses and have unintended consequences, due to the costs and poten;al impact on the broader state economy. Source: Viability and Impacts of Implemen;ng Various Power Plant Cooling Technologies in Texas, prepared for EPRI by Texas A&M University, July

37 Mi;ga;ng Drought Effects Generators are taking many ac;ons to help ensure water supplies allow for reliable opera;on. Examples include: Implemen;ng water conserva;on measures Reusing water whenever possible Using treated municipal sewage effluent for cooling Upgrading power plant processes to minimize or eliminate use of water for non- cooling purposes Capturing, trea;ng and using storm runoff from the plant site Procuring addi;onal water rights Building pipelines to remote water sources Adding pumping capability Using advanced water treatment systems to treat and use surface water that naturally contains high levels of minerals or dissolved solids, thus avoiding use of higher quality surface water 37

38 Addi;onal Water Challenges: Invasive Species Zebra mussels clog cooling water intake valves, as well as impac;ng water supply. The mussels have mul;plied so quickly in Lake Texoma that the North Texas Municipal Water District is no longer able to pump water. Hydrilla, a non- na;ve invasive aqua;c plant, is found in over 100 bodies of water in Texas. In great quan;;es, it can affect water supplies and opera;ons of power plants. 38

39 Genera;on and Water Usage: Summary Water consump;on for electric genera;on is currently 4% of total Texas water demand. The Texas Water Development Board projects this to grow to 7.4% by It is noteworthy that this increase in water usage is sufficient to provide electricity for a popula;on projected to grow over the same ;me frame by 82%. AECT member companies have made substan;al investments to secure water contracts/ rights and groundwater resources and build and maintain reservoirs in advance of actual use. All of these water contracts/rights and groundwater resources have been or are held for substan;al periods of ;me for future genera;ng units and also during drought periods for exis;ng power plants. AECT member companies are working hard to ensure adequate water supply for reliable electric genera;on, including building pipelines to remote water sources, seeking addi;onal water rights, adding pumping capability, and use of effluent for cooling, and implemen;ng water conserva;on measures. 39

40 Transmission and Distribu;on U;li;es 40

41 TDUs Role in the Compe;;ve ERCOT Market Transmission and DistribuLon ULliLes: Provide reliable delivery of electricity on a 24-7 basis. Invest in and build infrastructure (e.g., transmission lines, Smart Grid) to support the needs of Texas growing economy. Manage their transmission networks under the direc;on of ERCOT; coordina;ng with ERCOT on transmission planning ac;vi;es. Respond to outages (e.g., storms, natural disasters) that affect the grid and restore service as quickly as safely possible. Provide key market informa;on, such as premise informa;on and metering services to facilitate successful opera;on of the ERCOT deregulated market. Provide regulated transmission and distribu;on services to facilitate opera;ons of wholesale and retail business en;;es. Charge regulated delivery rates to REPs Rates based on a historical cost of service including a PUC- established return on capital investment Alloca;on of ERCOT- wide transmission costs Non- bypassable charges include the cost to deliver electricity, System Benefit Fund, recovery of true- up costs and nuclear decommissioning expenses for exis;ng nuclear facili;es 41

42 Transmission & Distribu;on Market Design: ERCOT ERCOT Transmission 1995 amendments to the Public U;li;es Regulatory Act (PURA) required PUC to ensure open access to transmission grid, allowing new independent generators to u;lize transmission network. TX76RSB 7 adopted postage stamp transmission pricing structure and eliminated impact of loca;on on transmission rates. Transmission Cost of Service (TCOS) ratemaking structure implemented and billed to distribu;on service providers (DSP). DSPs recover TCOS through the TDSP delivery rate and transmission cost recovery factor (TCRF), approved by PUC. New transmission investment is coordinated through the ERCOT regional transmission planning process and requires PUC facility cer;fica;on. 42

43 Con;nued Transmission and Distribu;on Investment Needed Throughout Texas According to the Texas State Data Center, 5 million new residents are expected in Texas by New genera;on must be delivered effec;vely and efficiently to popula;on centers of the state. Texas must provide regulatory certainty and fair rates of return to ensure appropriate capital investment. 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 (most recent update) 43

44 Challenges of Transmission Line Construc;on Example of Transmission ConstrucLon Process in ERCOT While certain types of genera;on can be constructed quickly - - ofen as short as months - - transmission lines typically take between three and five years. Genera;on can be brought into the market more rapidly if the si;ng takes advantage of the exis;ng transmission infrastructure. Building long transmission lines can affect many landowners, ofen requiring a lengthy and extensive easement acquisi;on effort. The transmission line si;ng process must take into account the impact of those lines on environmentally sensi;ve and historically significant lands. U;lity is not typically allowed to begin recovering costs un;l year 5 or 6. 44

45 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. 45

46 Transmission & Distribu;on Market Design: Non- ERCOT Non- ERCOT Transmission Wholesale open access transmission rights subject to Federal Energy Regulatory Commission (FERC) jurisdic;on. FERC transmission pricing reflects loca;on of genera;on. FERC requires generators to bear higher cost rela;ve to the ERCOT system of connec;ng with the transmission grid. Cer;fica;on in Texas is with the PUC. PUC rules allows most non- ERCOT u;li;es to recover transmission investments between rate cases through a transmission cost recovery factor (TCRF). U;li;es may also recover certain distribu;on investments between rate cases through a distribu;on cost recovery factor (DCRF) 46

47 Compe;;ve Renewable Energy Zones: Legisla;ve and Regulatory Steps The Texas Legislature mandated steady increases in renewable power in TX76RSB 7 (1999) and TX791RSB 20 (2005). Star;ng Line: 880 MW in 1999 Old Goal 1: 2,880 MW by 2009 (Achieved by 2007) New Goal 1: 5,880 MW by 2015 New Target 1: 10,000 MW by 2025 New Target 2: 500 MW non- wind renewable genera;on TX791SB 20 (2005) also required PUC to: designate Compe;;ve Renewable Energy Zones (CREZs) in areas in which renewable energy resources and suitable land areas are sufficient to develop genera;ng capacity from renewable technologies; develop a plan to construct necessary transmission capacity in a manner that is most beneficial and cost effec;ve to customers; and take into account transmission constraints, the need for genera;on and the level of financial commitment by generators when defining CREZs. PUC adopted Substan;ve Rule in December 2006, which creates framework for determining CREZs. 47

48 Map of Compe;;ve Renewable Energy Zones 48

49 Energy Efficiency 49

50 Energy Efficiency in Texas: Overview Texas con;nues to be an energy leader through policies designed to improve the state s energy efficiency programs and bring improved technologies to the electric market. U;lity- run programs have reduced customer consump;on, thereby reducing the need for the construc;on of new genera;on. Advanced metering provides informa;on and opportuni;es that enable customers to take beter control of their energy consump;on and bills. Houston and Dallas- Fort Worth ranked 1 and 2 na;onally in number of homes that qualified for EPA s Energy Star designa;on. The Texas Electric Choice Act requires electric u;li;es to provide energy efficiency programs and incen;ves, including efficiency programs for low- income customers. TX80RHB 3693 raised the energy efficiency goal for electric u;li;es from 10% of annual demand growth to 15% in 2008 and 20% in The recent PUC recently passed a rule requiring u;li;es to offset 30 percent of their projected growth in demand by ERCOT compe;;ve retailers are developing innova;ve plans and products that will help customers use less energy (e.g., customer educa;on programs, energy audits, Internet- controllable thermostats, etc.) 50

51 Energy Efficiency Programs Have Exceeded Goals Demand ReducLon by Investor- Owned ULliLes, In 2013, the majority of u;li;es in Texas exceeded their statewide energy efficiency goals. U;li;es achieved 548 GWh of energy savings and 415 MW of peak demand reduc;on. Source: Fron;er Associates LLC, Energy Efficiency Accomplishments of Texas Investor Owned U;li;es, Calendar Year 2013, prepared for the Electric U;lity Marke;ng Managers of Texas (EUMMOT) 51

52 Benefits of Advanced Metering Advanced meters and other new technologies and associated infrastructure will provide informa;on and opportuni;es that will enable customers to beter understand the impact of controlling their energy consump;on. By controlling their energy consump;on, customers can beter manage their bills and lessen their environmental impact. Advanced meters will allow for more automa;on of u;lity func;ons such as meter reading and connec;ons/disconnec;ons, which help to reduce costs. 52

53 The Smart Grid Transforms the Way We Buy, Deliver and Use Electricity Key Stakeholder Electric ULlity Benefits Automated meter reading Improved system reliability and greater ease/;meliness of power restora;on Improved line fault detec;on and diagnos;cs Real ;me grid feedback allows for more effec;ve loading of u;lity assets Enables increased monitoring and diagnos;cs to enhance the life of u;lity assets Consumers Retailers Electric reliability improvements Friendly access to detailed consump;on informa;on to make informed choices and enable faster transac;ons Enables and promotes energy conserva;on Efficient switching and connec;ons/disconnec;ons Expands retailer s ability to offer new products Establishes plaxorm to offer future home appliance monitoring and control Allows retailers to offer pre- payment programs Efficient switching and connec;ons/disconnec;ons Environment Enables demand- side management Facilitates integra;on of solar and wind genera;on into grid Promotes energy efficiency through immediate energy consump;on awareness Facilitates reduced electric consump;on which leads to reduced power plant emissions 53

54 Advanced Meters Have been Proven to be Accurate, Safe and Reliable Accurate: Advanced meters are rigorously tested and must be independently cer;fied to prove their measurements are accurate. In fact, repeated tests confirm that advanced meters are ofen more accurate than analog meters. Beneficial: Increased reliability, restora;on afer a power outage and 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. U;li;es use advanced encryp;on 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 scien;fic literature reflects that there is no credible evidence of nega;ve health impacts from the low level of RF emissions from digital meters. Private: U;li;es adhere to PUC rules and strict policies, following Texas laws that regulate the use of personal informa;on for business func;ons like billing and customer service. 54

55 Compe;;ve Retail Electric Market in ERCOT 55

56 The ERCOT Compe;;ve Retail Electric Market is Providing Strong Customer Benefits Key Takeaways Price offers are substan;ally lower than prices available just before compe;;on began, especially when adjusted for infla;on Texas na;onal electric price ranking has improved since the market opened in 2001 Every compe;;ve area in ERCOT has variable and 1- year lock offers available that are far lower than the na;onal average price and nearly all state averages Among states like Texas that depend heavily on natural gas for power genera;on, Texas prices compare favorably, with even lower prices available to those in the compe;;ve market The ERCOT market provides efficient market prices that track natural gas prices 56

57 Lower Prices Available Today than Before Compe;;on Began July 2015 December 2001 Service Area Average Fixed- Price Offer (12-month term) Lowest Fixed-Price Offer (12-month term) Lowest Price Offer Available Dec prices, not adjusted for inflation Dec prices, adjusted for inflation AEP Texas Central 10.1 /kwh 5.7 /kwh 5.6 /kwh 9.6 /kwh 12.9 /kwh AEP Texas North 10.2 /kwh 5.9 /kwh 5.9 /kwh 10.0 /kwh 13.5 /kwh CenterPoint Energy 9.5 /kwh 5.0 /kwh 4.7 /kwh 10.4 /kwh 14.0 /kwh Oncor 8.9 /kwh 5.1 /kwh 4.5 /kwh 9.7 /kwh 13.1 /kwh TNMP 9.5 /kwh 5.8 /kwh 5.5 /kwh 10.6 /kwh 14.3 /kwh Sources: PUC Historical Data, Bureau of Labor Sta;s;cs - Consumer Price Index (34.7% infla;on since December 2001), offers as of July 1,

58 Texas Na;onal Price Ranking Has Improved Since State Ranking (Pre- CompeLLon) WA LA WV KY AR ND TN OR NE OK UT MT WY SD NC ID IN FL VA GA MO CO TX AL MS IA NM MN AZ SC KS OH DC IL NV MD PA MI DE WI NJ ME CA VT NY RI NH AK MA CT HI KY WA ID WV OR TN ND NE UT WY MT IN MO AL OK MS SD CO MN KS MD SC AR GA DC VA WI LA NC MI AZ OH IA FL /kwh /kwh DE IL NM TX NV PA NJ CT CA AK RI MA NH VT ME NY HI Average lowest 12- month fixed price offer in compellve market in May 2015: 5.6 /kwh May 2015 State Ranking (Latest Available) Source: EIA average annual residen;al rates for 2001 and May 2015 monthly data (latest available informa;on). Average lowest available price from powertochoose.org Web site as of May 1, 2015 for a residen;al customer using an average of 1,000 kwh per month. 58

59 Electric Price Offers Compared With Other Retail Products Price Change: December 2001 to May 2015 Gallon of Gas Dozen Eggs Ground Beef Ground Coffee Hourly Legal Services U.S. Average Residen;al Electricity Loaf of White Bread Houston- Galveston Rent Dallas- Fort Worth Rent Gallon of Milk ERCOT Average Lowest Fixed Price Offer ERCOT Average Lowest Available Offer 145% 112% 99% 62% 57% 56% 46% 44% 30% 17% - 44% - 44% Sources: Dec 2001 electric rates: Public U;lity Commission of Texas; May 2015 electric rates: Power to Choose; Average Residen;al Electricity: U.S. Energy Informa;on Administra;on (Dec 2001 and May 2015; All other data: U.S. Bureau of Labor Sta;s;cs 59