Texas NonERCOT Areas

1
Texas Non-ERCOT Areas

• Gulf Coast Power Association Fall Conference
• Austin, Texas
• October 2, 2002

2
Competition in non-ERCOT areas

• Wholesale generation and transmission markets
  operate under FERC approved Open Access
  Transmission Tariffs (OATTs).
• OATTs designed to facilitate wholesale
  competition, not retail
• PUCT jurisdiction over retail service
• ERCOT to perform customer registration role

3
Steps needed for full retail competition

• Certification of an independent organization by
  the PUCT
• RTO membership can meet requirement
• Certification of a qualified power region (QPR)
• Need sufficient of utilities under independent
  organization
• Need open and non-discriminatory access to
  transmission
• 20 limit on installed capacity

4
Less than full retail competition

• Areas can move forward without independent
  organization and QPR, but
• Cant be QPR without independent organization
• If no QPR, Affiliated REP must continue to offer
  1/1/99 bundled rates to non-price to beat
  customers
• PTB obligation extends 60 months after area is
  open to competition.

5
Status of Non-ERCOT Areas

• East Texas competition delayed
• PUC orders
• Timing to be decided
• Panhandle competition delayed
• 2001 amendment to PURA
• Competition to begin 2007
• El Paso under SB 7 competition to begin in 2005

6
Problems with East Texas

• No customers switched during pilot program
• No REPs in retail market
• No independent organization
• Perception that transmission provider would/does
  favor its affiliates
• Lack of needed wholesale market features
• Network transmission service not always available
  in timely manner
• No market-based congestion management
• Inequitable balancing energy and ancillary
  services markets

7
Commission Decisions on East Texas

• Staff filed petitions to delay retail competition
  for Entergy and SWEPCO
• Commission delayed competition
• Pilot projects remained open and ability to
  expand if needed
• Projects initiated to develop infrastructure and
  market rules for competition

8
Southeast Texas

• Entergy is one of sponsors of SeTrans RTO
• FERC and state filings required
• Projected Phase 1 operations in January 2004
• Entergy has filed draft protocols with Texas PUC
• Opportunity for market participants to shape
  protocols
• Workshops over the next several months to work
  out details

9
Northeast Texas

• SWEPCO currently a member of Southwest Power Pool
  (SPP)
• SPP plans to merge with Midwest ISO, a FERC
  approved RTO
• AEP has conditionally decided to join MISO, but
  SeTrans remains an option as well.
• MISO, SPP, and PJM have executed memorandum of
  cooperation to develop a joint and common
  wholesale market

10
FERC Standard Market Design

• Independent operation of transmission system and
  wholesale markets
• Eliminate disparate treatment of transmission
  customers
• Add wholesale market features not required in
  current open-access tariffs
• Standardization of market design

11
Independent Transmission Operation

• Utilities can join RTO
• Utilities can establish independent operator of
  their transmission systems
• RTO process will continue on separate track at
  FERC

12
Disparate Transmission Service

• Eliminate distinctions between wholesale and
  bundled retail transmission service
• Eliminate distinctions between network and
  point-to-point service
• New network access service
• Eliminate pancaking of rates
• Loads pay rate to system where power is taken off
  the system

13
Essential Wholesale Market Features

• Market-based congestion management (LMP)
• Congestion revenue rights provide hedging
  mechanism
• Market for balancing energy and ancillary
  services
• Day-ahead and real-time markets

14
Standardization

• Standardized transmission and market design
  across regions
• Ancillary services
• Congestion management
• Standardized transmission service for retail and
  wholesale
• Common mechanism for generation adequacy

15
Other SMD Features

• Mitigation of market power
• Must offer, local bid caps, and safety-net bid
  caps
• Independent boards for independent transmission
  operators
• Long-term resource adequacy
• Market monitoring

16
SMD Timetable

• Comments on rule November 15, 2002
• Adopt rule Early 2003
• Wholesale and retail under same tariff October
  1, 2003
• Fully implement SMD October 1, 2004