Analyzing Electric Prices in Different Regions of Texas Requires ...
April 2005
Analyzing Electric Prices in Different Regions of Texas Requires Careful Study of Multiple Factors Natural Gas Prices Raising Electric Prices Natural gas is the predominant fuel for use of generating electricity in Texas, ultimately setting the price of electricity. Natural gas prices have increased by nearly 200 percent since the competitive market opened on January 1, 2002. Price-to-beat increases suggest that prices are reflecting these increased fuel costs. Real Choices for Texans Texas’ competitive areas have as many as 11 providers from which residential customers can choose, with potential price savings of up to 31 percent in some areas of the state. A Strong Market Adjustments to the price-to-beat fuel factor are made to reflect significant changes in the market price of natural gas and purchased energy. Without these adjustments, affiliated retail electric providers could be forced to sell electricity below the wholesale price, creating the sort of bankruptcy problems seen in California. Without the ability to adjust for the cost of purchased energy, competition would be thwarted as providers would be forced to sell electricity below their cost for supply and providing service. Needed For Economic Development Large commercial and industrial customers quickly took advantage of retail electric choice. According to the PUC, over 91 percent of large commercial and industrial customers have negotiated new contracts with their retail electric providers.
Legislative advertising paid for by: John W. Fainter, Jr., President and CEO • Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
April 2005
Electric Competition: Current Status Report In each area of the state in which electric choice has begun, residential customers have multiple retail electric providers (REPs) and products from which to choose and the potential for substantial savings.
Texas-New Mexico Power Co. AEP Texas North Number of REPs: Number of Products:
9 13
Number of REPs:
10
Number of Products:
17
Potential Savings for price-to-beat customers: 17%
Potential Savings for price-tobeat customers: 19%
TXU Electric Delivery Number of REPs:
13
Number of Available Products:
20
Potential Savings for price-tobeat customers: 15%
AEP Texas Central Number of REPs:
12
Number of Products:
19
Potential Savings for price-to-beat customers: 20%
CenterPoint Energy Number of REPs:
13
Number of Products:
20
Potential Savings for price-to-beat customers: 21% Source: Public Utility Commission of Texas powertochoose.org As of April 20, 2005
Legislative advertising paid for by: John W. Fainter, Jr., President and CEO • Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
April 2005
Comparisons With Other Industries: Choices
Despite that Texas’ retail electric market has only been open for about three years, the number of retail electric providers (REPs) in each competitive region of the state compares favorably with the number of brands of other competitive services. Shown are comparisons of the number of brands for several services available in Dallas, Houston and Corpus Christi.
Legislative advertising paid for by: John W. Fainter, Jr., President and CEO • Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
April 2005
Texas’ Statewide Average Electric Rates vs. Other States’ Texas’ electric rates compare favorably to those in other populous states throughout the nation—states Texas is competing with to attract and keep new businesses in the state. With the price of electricity one of the keys for determining where to locate a business, Texas’ prices, along with its competitive market, help ensure our state continues to grow.
January - December 2004 Electric Rates (¢/kWh) 10 Most Populous States Weighted Average of Residential, Industrial, Commercial and Other Sales 14
12
10-State Weighted Average: 8.53¢/kWh Source: Energy Information Administration Electric Power Monthly, Tables 5.4.B and 5.6.B
10
8
6
4
2
Chart includes all sales within state of Texas
Legislative advertising paid for by: John W. Fainter, Jr., President and CEO • Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
New York
California
New Jersey
Florida
Pennsylvania
Texas
Michigan
Illinois
Ohio
Georgia
0
April 2005
Update on Natural Gas Prices The price-to-beat is the price for electricity that can be charged by affiliate REPs in their incumbent service territories to serve residential and small-commercial customers. Though the price-to-beat price is fixed, its fuel factor may be adjusted by the affiliate REP up to twice per year. In ERCOT, the marginal fuel for electric generation is natural gas. As a result, wholesale power prices highly correlate with the price of natural gas.
Daily Moving Average 12 Month NYMEX Forward Natural Gas Price ($/MMBtu)* ( *Per PUCT rules, a 10-day moving average was used prior to 4/23/2003 and a 20-day moving average was used thereafter) 8 7.5 7 6.5 6 5.5 5 4.5 4 3.5 3 2.5 2 Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Legislative advertising paid for by: John W. Fainter, Jr., President and CEO • Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
April 2005
Significant Switching Across All Customer Classes
Customer choice among eligible customers has seen higher switching levels than other restructured industries. In the residential market, while 20 percent is currently served by a new entrant, all customers have had competitive offers to consider and actively made a choice.
Retail Electric Choice: Good for Customers, Good for Texas
Legislative advertising paid for by: John W. Fainter, Jr., President and CEO • Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
April 2005
Texas is Leading the Nation in New Entrant Market Share
Large commercial and industrial customers quickly took advantage of retail electric choice. According to the Public Utility Commission of Texas (PUC), over 91 percent of large commercial and industrial customers have negotiated new contracts with their retail electric providers.
Retail Electric Choice: Good for Customers, Good for Texas
Legislative advertising paid for by: John W. Fainter, Jr., President and CEO • Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
April 2005
Texas Leads the Nation in Retail Electric Competition Among Residential Customers
Texas’ electric market is the most active restructured residential retail market in the U.S. Residents in all areas of the state where electric choice has begun have between 7 and 13 retail electric providers from which to choose.
Retail Electric Choice: Good for Customers, Good for Texas
Legislative advertising paid for by: John W. Fainter, Jr., President and CEO • Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
Analyzing Electric Prices in Different Regions of Texas Requires Careful Study of Multiple Factors Natural Gas Prices Raising Electric Prices Natural gas is the predominant fuel for use of generating electricity in Texas, ultimately setting the price of electricity. Natural gas prices have increased by nearly 200 percent since the competitive market opened on January 1, 2002. Price-to-beat increases suggest that prices are reflecting these increased fuel costs. Real Choices for Texans Texas’ competitive areas have as many as 11 providers from which residential customers can choose, with potential price savings of up to 31 percent in some areas of the state. A Strong Market Adjustments to the price-to-beat fuel factor are made to reflect significant changes in the market price of natural gas and purchased energy. Without these adjustments, affiliated retail electric providers could be forced to sell electricity below the wholesale price, creating the sort of bankruptcy problems seen in California. Without the ability to adjust for the cost of purchased energy, competition would be thwarted as providers would be forced to sell electricity below their cost for supply and providing service. Needed For Economic Development Large commercial and industrial customers quickly took advantage of retail electric choice. According to the PUC, over 91 percent of large commercial and industrial customers have negotiated new contracts with their retail electric providers.
Legislative advertising paid for by: John W. Fainter, Jr., President and CEO • Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
April 2005
Electric Competition: Current Status Report In each area of the state in which electric choice has begun, residential customers have multiple retail electric providers (REPs) and products from which to choose and the potential for substantial savings.
Texas-New Mexico Power Co. AEP Texas North Number of REPs: Number of Products:
9 13
Number of REPs:
10
Number of Products:
17
Potential Savings for price-to-beat customers: 17%
Potential Savings for price-tobeat customers: 19%
TXU Electric Delivery Number of REPs:
13
Number of Available Products:
20
Potential Savings for price-tobeat customers: 15%
AEP Texas Central Number of REPs:
12
Number of Products:
19
Potential Savings for price-to-beat customers: 20%
CenterPoint Energy Number of REPs:
13
Number of Products:
20
Potential Savings for price-to-beat customers: 21% Source: Public Utility Commission of Texas powertochoose.org As of April 20, 2005
Legislative advertising paid for by: John W. Fainter, Jr., President and CEO • Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
April 2005
Comparisons With Other Industries: Choices
Despite that Texas’ retail electric market has only been open for about three years, the number of retail electric providers (REPs) in each competitive region of the state compares favorably with the number of brands of other competitive services. Shown are comparisons of the number of brands for several services available in Dallas, Houston and Corpus Christi.
Legislative advertising paid for by: John W. Fainter, Jr., President and CEO • Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
April 2005
Texas’ Statewide Average Electric Rates vs. Other States’ Texas’ electric rates compare favorably to those in other populous states throughout the nation—states Texas is competing with to attract and keep new businesses in the state. With the price of electricity one of the keys for determining where to locate a business, Texas’ prices, along with its competitive market, help ensure our state continues to grow.
January - December 2004 Electric Rates (¢/kWh) 10 Most Populous States Weighted Average of Residential, Industrial, Commercial and Other Sales 14
12
10-State Weighted Average: 8.53¢/kWh Source: Energy Information Administration Electric Power Monthly, Tables 5.4.B and 5.6.B
10
8
6
4
2
Chart includes all sales within state of Texas
Legislative advertising paid for by: John W. Fainter, Jr., President and CEO • Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
New York
California
New Jersey
Florida
Pennsylvania
Texas
Michigan
Illinois
Ohio
Georgia
0
April 2005
Update on Natural Gas Prices The price-to-beat is the price for electricity that can be charged by affiliate REPs in their incumbent service territories to serve residential and small-commercial customers. Though the price-to-beat price is fixed, its fuel factor may be adjusted by the affiliate REP up to twice per year. In ERCOT, the marginal fuel for electric generation is natural gas. As a result, wholesale power prices highly correlate with the price of natural gas.
Daily Moving Average 12 Month NYMEX Forward Natural Gas Price ($/MMBtu)* ( *Per PUCT rules, a 10-day moving average was used prior to 4/23/2003 and a 20-day moving average was used thereafter) 8 7.5 7 6.5 6 5.5 5 4.5 4 3.5 3 2.5 2 Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Legislative advertising paid for by: John W. Fainter, Jr., President and CEO • Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
April 2005
Significant Switching Across All Customer Classes
Customer choice among eligible customers has seen higher switching levels than other restructured industries. In the residential market, while 20 percent is currently served by a new entrant, all customers have had competitive offers to consider and actively made a choice.
Retail Electric Choice: Good for Customers, Good for Texas
Legislative advertising paid for by: John W. Fainter, Jr., President and CEO • Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
April 2005
Texas is Leading the Nation in New Entrant Market Share
Large commercial and industrial customers quickly took advantage of retail electric choice. According to the Public Utility Commission of Texas (PUC), over 91 percent of large commercial and industrial customers have negotiated new contracts with their retail electric providers.
Retail Electric Choice: Good for Customers, Good for Texas
Legislative advertising paid for by: John W. Fainter, Jr., President and CEO • Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
April 2005
Texas Leads the Nation in Retail Electric Competition Among Residential Customers
Texas’ electric market is the most active restructured residential retail market in the U.S. Residents in all areas of the state where electric choice has begun have between 7 and 13 retail electric providers from which to choose.
Retail Electric Choice: Good for Customers, Good for Texas
Legislative advertising paid for by: John W. Fainter, Jr., President and CEO • Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
