PUC Update Electric Competition in Texas

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PUC Update -Electric Competition in Texas

• Bridget Headrick
• Public Utility Commission of Texas
• 2003 TPPA Annual Meeting
• July 29, 2003

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Electric Competition in Texas

• Today - a healthy beginning to the competitive
  market with ample generation, adequate
  transmission, and reasonable prices
• Statistics on entities participating in the
  market and customer switching
• Overcoming challenges from transactional and
  billing issues
• Wholesale market design and other rulemakings
• PUC activities and customer education efforts

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TodayA Healthy Beginning

• Solid legal framework
• Structural separation
• Retail pricing structure to protect consumers and
  foster competitive offers
• Use of long-term wholesale bilateral contracts
  shields customers from price volatility
• Ample generation
• Total installed capacity of 77,000 MW, with an
  additional 2,500 MW under construction
• Over 30 reserve margin in ERCOT
• 7,200 MW of announced capacity have been delayed
  and more than 7,300 MW have been cancelled

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True or False?
By 2008, ERCOT projects that there will be a
shortage of generation capacity.
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False!

• In the Report on the Capacity, Demand, and
  Reserves in the ERCOT Region issued by ERCOT (May
  2003), ERCOT projects the following reserve
  margins
• 38.3 in 2003
• 42.6 in 2004
• 39.6 in 2005
• 40.0 in 2006
• 36.7 in 2007
• 33.2 in 2008

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Adequate Transmission

• Over 37,000 miles of transmission lines in ERCOT
• ERCOT facilitates regional transmission planning
• Plan to address constraints in West Texas
• Over 900 ROW miles of transmission facilities
  completed since 1998
• No constraints have threatened reliability
• Increased statutory authority for PUC to order
  transmission line construction

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True or False?
There are over 800 million dollars in
transmission projects currently under
development in ERCOT.
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True!

• The Monthly Construction Progress Reports filed
  by utilities for May 2003 show 870,392,359 for
  262 transmission projects currently under
  development in ERCOT.

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Market Participants

• Numerous market participants
• 62 REPs certified by PUC
• 5 new REPs testing at ERCOT in July
• 141 aggregators registered with the PUC

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True or False?
ERCOT estimates that over half of the load (peak
demand) of large non-residential customers was
with a non-affiliated REP in March 2003.
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True!
Load Served by Competitive and Affiliate REPs
8,867 MW
14,696 MW
18,846 MW
Reported by ERCOT as of March 31, 2003
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Load Served by Competitive and Affiliate REPs
by TDU Territory
AEP North
CenterPoint
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Number of ESI IDs Served by Competitive and
Affiliate REPs
3,888
990,631
4,915,701
Reported by ERCOT as of March 31, 2003
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In what area is the affiliated REP approaching
loss of 40 of its small commercial load?
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Houston! and Dallas!

• CenterPoint and Oncor both filed notices that
  over 35 of the total kWh consumed by small
  commercial customers calculated in accordance
  with P.U.C. Subst. R. 25.41(i) was now being
  served by competitive REPs.
• At the end of March, approximately 38 in the
  CenterPoint area.
• At the end of May, approximately 37 in the Oncor
  area.
• Once 40 of small commercial load is served by
  competitive REPs, Reliant Resources and TXU
  Energy will be able to offer rates other than the
  PTB to small commercial customers in their PTB
  service territories.

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Overcoming Challenges

• Transactional issues
• 70 chance of a successful switch in March 2002
• 98.6 in the first quarter of 2003
• Billing issues
• Approximately 150,000 customers were missing
  bills in June 2002
• Only 66,706 customers were missing bills in March
  2003

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Local Congestion Costs

• Local congestion costs are uplifted to load
• From July 31, 2001 to June 30, 2003, the
  following costs were incurred for local
  congestion
• 220 million for energy payments
• 254.2 million for capacity payments and RMR
• Total of 474.2 million for local congestion
  since the market opened

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Wholesale Market Design -Proposed Rule

• Decrease uplift of local congestion costs
• Assign congestion rents to resources that caused
  the congestion
• Improve operational efficiency
• Require resource-specific bid curves
• Increase market price transparency
• Voluntary day-ahead energy market
• Price signals
• Nodal energy prices for resources
• Information for energy trading hubs
• Zonal energy prices for loads
• Prevent market power abuses
• Price mitigation measures

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Other Pending and Planned PUC Rulemakings

• Enforcement of wholesale market rules
• Bilateral transaction reporting
• Competitive energy services
• Customer protection
• Billing and collection of transition charges
• Planning reserve margin requirement

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PUC Activities

• Ensure the long-term viability of the system for
  a workable, sustainable competitive market
• Prevent market power abuses and gaming
• Enforcement of market rules
• 2004 true-up proceedings
• Sunset in 2005
• Ensure reliable and adequate transmission
• Continue regulation in non-ERCOT areas of Texas
  where competition has been delayed
• Oversee controlled progression of competition to
  non-ERCOT areas and the areas served by
  municipally-owned utilities and cooperatives once
  opt-in decisions are made
• Customer protection and education

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Customer Education

• Successful Texas Electric Choice campaign
• Inform customers of rights, protections, how to
  shop, and available tools
• Educational tools and materials include a website
  with a rate comparison tool, call center, fact
  sheets and brochures, and various promotional
  items
• Campaign activities have included public
  relations, advertising (web, TV, radio, and
  print), targeted community events, and grassroots
  outreach
• Goal is to direct people to www.powertochoose.org
  or 866-PWR-4-TEX
• Funding reduced, but will be able to maintain the
  website, call center, and community outreach

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True or False?
Approximately 70 of residential and business
consumers have positive views of electric
competition in Texas.
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True!

• A random telephone survey performed by the Center
  for Research and Public Policy and presented to
  the PUC in May 2003 contained the following
  results for consumer views on electric
  competition in Texas
• 22.4 residential very positive
• 46.7 residential somewhat positive
• 25.9 business very positive
• 42.4 business somewhat positive

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Questions