LEGISLATIVE STAFF BRIEFING

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LEGISLATIVE STAFF BRIEFING

• Presented by the
• Association of Electric Companies
• of Texas
• SEPTEMBER 26, 2001

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Association of Electric Companies of Texas (AECT)
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Emergency Plans Implemented

• Emergency Plans on file at the PUC
• State and National Communications Heightened
• Nuclear Plants operating at highest level of
  alert
• Natural Gas Supply to Power Plants

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Effect on Electric Prices

• In 2000, natural gas prices soared, which caused
  utilities to petition the PUC to increase fuel
  charges.
• Utilities can adjust fuel charges up to twice per
  year.
• Utilities do not mark up fuel expenses and
  purchased power, meaning no profit is made.
• Once competition begins, utilities can change the
  price-to-beat if the market prices of fuel and
  purchased power change.
• Now that prices have dropped, the PUC will
  readjust those fuel charges

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Competition Timeline
MAY 1995
May 1999
Sept. 1999
Jan. 2000
June 2001
Jan. 2002
Texas Electric ChoiceAct passed
Wholesale competition legislation passed
Business separation plans filed
Electric rates frozen
Pilot Project Begins
Retail competition begins 6 discount for most
Texans
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Pilot Project The Beginning

• 5 of most investor-owned utilities load
  (allocated by customer class residential,
  commercial, industrial) eligible for choice
• Sign up has been on a first-come, first served
  basis.
• 15 REPs participating in pilot project

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Pilot Project Challenges

• Changes from 10 control areas to one under ERCOT
  control took longer than expected and contributed
  to the delay of the pilots start
• Computer problems and participant unfamiliarity
  with the bidding process contributed to minor,
  but highly publicized, price spikes in the
  ancillary market.
• Utilities have received erroneous interim
  settlement bills
• Difficulties encountered in transferring customer
  data into the central computer system and
  transferring data between ERCOT and market
  participants
• Fewer than 2,000 customers out of a 70,000
  backlog actually receiving power from new
  electric provider

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Pilot Project Accomplishments

• Policies and procedures for the new market have
  been developed through 40 major PUC rulemakings
  and about 200 workshops and industry working
  groups
• ERCOT has been certified by the PUC and now
  operates the grid by new protocols for settlement
  and accounting
• ERCOT has built a new Operation Center and
  interconnected its computer system
• Switches now beginning to be processed at full
  speed--20,000 switches instigated during one day

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Pilot Project The Beginning

• Pilot Project was designed to be a test period of
  a small group of customers before full
  implementation
• No customers have been left without power and no
  retail customers have paid higher prices as a
  result of pilot project
• It is better to do it right than do it fast

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Customer Protections

• Most residential and small-commercial customers
  will automatically receive a 6 discount.
• With ability to choose new REP, customers can
  shop for even lower prices
• All REPs and aggregators certified by PUC
• Provider of Last Resort (POLR)
• Customer discrimination prohibited
• No slamming or cramming
• Customer information confidentiality
• No-Call List

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Customer Protections

• Most residential and small-commercial customers
  will automatically receive a 6 discount.
• With ability to choose new REP, customers can
  shop for even lower prices
• All REPs and aggregators certified by PUC
• Provider of Last Resort (POLR)
• Customer discrimination prohibited
• No slamming or cramming
• Customer information confidentiality
• No-Call List

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Texas Poll

• 1. Overall, how satisfied are you with your
  electric utility service? 1.
• Very/Somewhat satisfied 77
• Not very/Not at all satisfied 19
• 2. Do you agree or disagree that there should be
  more competition in the electric power industry
  in Texas?
• Agree 67
• Disagree 15
• Neutral 10

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Texas Poll

• 3. Two years ago, the state Legislature passed a
  law deregulating the electric utility industry in
  Texas. The law is scheduled to take effect
  statewide on January 1, 2002. Do you favor or
  oppose of this law?
• Favor 56
• Oppose 20
• Neutral 14
• 5. When the deregulation law takes effect in
  Texas, it will allow consumers to choose their
  own electric company. How likely are you to
  switch to another electric company?
• Very/Somewhat Likely 46
• Not very/Not at all Likely 37

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Questions and Answers
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www.aect.netwww.powertochoose.org