Click here to download a PDF of this presentation.

“The most immediate concern is whether dwindling water supplies will hurt electric generators’ ability to produce the power we need. Texas continues to add homes, hospitals, factories and offices statewide, not to mention other energy-intensive services like irrigation, drinking water treatment and wastewater treatment.”

Click here to read the rest of AECT’s John Fainter in the Statesman.

Date: January 10th, 2012

Topic: Drought Impacts on Electric Generation

Good morning to the Chairmen and members, my name is John Fainter. I am here on behalf of the Association of Electric Companies of Texas (AECT) to discuss the impact of current and anticipated drought conditions on electric generation capacity in Texas.

Electric generating companies use water in the cooling process for electricity generation. This water is most often obtained from man-made cooling reservoirs that were constructed for the purpose of providing cooling water to the electric generation. It is non-consumptive use because most of the water is used for cooling, then returned to the cooling reservoirs from which it was obtained.

Electric generating companies have built and developed reservoirs and water infrastructure across Texas and are among the largest private holders of water rights and water contracts in Texas. Generators have made substantial investments to secure water contracts and rights and groundwater resources in advance of actual use to ensure continued operation of existing electric generation units and to promote the development of new generation.

AECT member companies have an outstanding record of stewardship and compliance with water regulations, and routinely conduct rigorous biological monitoring tests at generating facilities. Our companies also practice sound water conservation, restore aquatic habitats, preserve ecosystems and enhance and create valuable wetlands. On many facilities electric generating companies provide public recreation opportunities and provide land for state parks.

Generators strive to reuse and conserve as much water as possible at generation sites.

The reliable generation of electricity is necessary for pumping water to cities and farms, and for water treatment and sewage treatment – among other public health and safety necessities.

Moreover, the reliability of Texas’ electric generation is necessary for the state to meet the needs of our growing population and the new and growing businesses that fuel our state’s economy.

We’ve all felt the impact of the exceptional drought our state faced this summer. Our member companies are working hard to ensure adequate water supply for reliable electric generation, including building pipelines to remote water sources, seeking additional water rights, adding pumping capability, and use of effluent for cooling. Our members are participating in working groups at ERCOT to develop best practices for drought preparedness and are participating in the rulemaking at TCEQ to implement HB 2694’s language on suspension or adjustment of water rights during water shortage. But these activities alone do not guarantee that we will continue to have enough water to maintain current levels of generation.

Thus far, the actual impact of the drought on electric generation has been limited, with only 24 MW of generation placed offline due to the drought. ERCOT has estimated that if East Texas receives only half of its normal rainfall, unavailability of electric generation could go up to 434 MW by May 2012, and if there is no rain at all, unavailability could be as high as 3,044 MW.

In short, we need to ensure that continued access to adequate water is available for electric generating units to maintain reliability, especially in times of drought or water shortage.

Transmission and Distribution utilities have also experienced issues relating to the drought. The frequent wildfires resulting from the drought have burned many wooden T&D structures across the state, causing numerous localized outages. Once the wildfires are brought under control, these structures can be repaired or replaced and power restored.

This past spring and summer there were outages related to high levels of air-borne contaminants (sea salt and dust) on transmission and distribution facilities. Coastal winds deposit sea salt and dust onto insulators, bushings and peripheral line equipment. The lack of any appreciable rain resulted in increased electrical faults due to higher than normal accumulations.

The affected utilities have devoted significant resources to address the situation implementing plans and procedures to remove. Proactive washing including the use of helicopter-mounted rigs have been deployed until the natural rain washing cycle resumes. The PUC has initiated Project 39478 to review Transmission and Distribution Utility practices in addressing the contamination issue.

In summary, AECT member companies have worked to maintain access to reliable and affordable power, and continue to plan for our state’s energy needs. We look forward to continuing to work in collaboration with the agencies and water authorities in finding solutions for the future.

“As the market develops with technology, (customers) are going to have more and more choices of products, and all at a price that is lower than the price of the last regulated rate, said [John Fainter, President and CEO of AECT].”

…

“[M]ost business and residential customers have switched to electricity providers other than the formerly regulated utility companies, according to the Electric Reliability Council of Texas.”

…

“Today, the lowest one-year locked-in rate available to Dallas customers is 8.2 cents per kilowatt hour, and the average of all residential customers in the North Texas region is 9.5 cents.”

To supplement the article, see below for a chart showing how prices have changed compared with 2001, just before the market opened.

Sources and Notes

Public Utility Commission of Texas (PUC), 2003 PUC Scope of Competition (PDF)

Bureau of Labor Statistics – inflation from 2001 to 2011 is 27.85%

To determine average offers available in the market, visit Power to Choose and choose “Go Directly to Offers”. Then “Search By TDU Service Companies” and choose “ONCOR” to see what’s available in Dallas. Then download the offers for viewing with Excel and filter and sort to determine the average 12-month fixed price offer for 1000 kWh/month usage, as well as the lowest offers cited.

Rodrigo Reyna of Pflugerville, who just won a Chevy Volt Grand Prize from Oncor in a Biggest Energy Saver contest, says he lives in a big house with a small electric bill.

He told the Texas Public Utility Commission Thursday that he, his wife and his three daughters have always been energy conscious, but the contest taught them they could slash their energy use 39 percent over last year’s bill.

That’s the greatest consumption cut achieved in the contest that challenged Oncor and CenterPoint customers to cut their year-to-year home energy use with the help of Smart Meter technology between August and September.

The full piece is subscription only, but most interesting was the simple, low-tech ways the family reduced energy consumption, even during on of the hottest summers on record in Texas:

The family, whose daughters are either in their teens or early college years, turned off lights that were energy-efficient already, he said. They also used power strips for electronics like DVRs, televisions and DVD/game players. The family upgraded its air conditioning unit and used energy-efficient settings with a programmable thermostat. They also sealed ducts and pulled out their laundry from the drying machine halfway and hung the damp clothes on lines.

In Texas and the competitive retail electric market in ERCOT, it’s a different story.

• Between August 2006 and August 2011 (latest available), the national average residential electric price has risen by 11%, according to Energy Information Administration data.

• But the Texas statewide average residential electric price has fallen by 14% over the same period, using the same data source.

•  But what about the competitive market? Comparing the PUC’s archived offers shows that from August 2006 and August 2011, the average residential offer in the competitive market has fallen by 32%.

Note that the PUC data does not capture all offers available on powertochoose.org. Since March 2010, AECT has been regularly capturing the offers available in the market, available here.

The business of electricity is complex, but for Texas consumers eligible to shop around in the competitive retail market, the data is clear: competition is saving you money.

Retail offers in Texas’ competitive electric market are among the lowest prices available nationwide.

The chart above shows the latest U.S. Energy Information Administration data on average statewide electric prices, from August 2011, plus historical information from AECT on offers available from Power to Choose. Note the bar in red. It shows that the average price in Texas, regardless of provider, is below the national average. But note the orange bars, which show the lowest offered fixed-price and variable offers available in competitive areas. Customers who shopped and selected those plans have prices that are among the lowest in the nation.

Electric prices have multiple underlying factors.

Of course, there are countless underlying factors that affect electric prices, such as regional economic growth, electric grid boundaries and investment in new power plants and environmental improvements. In fact, prior to the opening of the competitive market, many municipally-owned utilities and rural electric cooperatives had electric rates well below those of, say, Houston or Dallas. This makes it necessary to more closely examine the factors behind prices, as well as pricing trends.

Within ERCOT, electric prices are affected greatly by changes in natural gas prices—a marked contrast to the rest of the nation, which is more dependent on coal. During 2008 and 2009 when natural gas prices began to fall, competitive forces—in the form of hundreds of available offers—helped push retail prices downward more quickly than they would have fallen under a still-regulated market. Competition also works when input prices rise by creating pressure for retailers to hold on to customers through competitive prices, better service and other benefits.

And it’s been working. Since 2007, nationwide prices outside Texas have risen by 21 percent, while, within the state, prices have fallen by six percent. Over the same period, the average lowest competitive price has fallen by 34 percent.

In the competitive market, one of the most effective ways to lower electric bills is to shop around.

Visiting the state-sponsored website www.PowerToChoose.org helps consumers find dozens of options in the market; consumers may also start by contacting their current retail electric provider, which may have different pricing plans to better suit their needs. Consumers have the opportunity to enjoy the benefits of lower prices, which is a welcome relief during difficult economic times.

The past 10 years have seen incredible changes in the Texas electric industry. Our state’s comprehensive adoption of technology and innovation has changed the way power is generated, distributed and consumed, while maintaining our tradition of effectively serving customers. To stay up on activities of the electric industry, please bookmark us at AECT.net, follow us on Facebook and Twitter.