Brief Update on Natural Gas Prices

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Brief Update on Natural Gas Prices

• Presented by the
• Association of Electric Companies
• of Texas
• October 31, 2000

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Natural Gas Prices

• Prices of natural gas have increased almost 100
  in 2000. As a result, utilities have had to
  increase their fuel charges.
• Utilities are not allowed to mark up fuel
  expenses and power purchased from third parties.
  
• The Texas Electric Choice Act (SB 7) includes a
  mechanism to change the price-to-beat when the
  market prices of fuel and purchased power
  change.

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Electric ChoiceHow Will It Work in Texas?

• Presented by the
• Association of Electric Companies
• of Texas
• October 31, 2000

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• Beginning January 1, 2002, most Texans will be
  able to choose their electric supplier.
• How will electric choice work in this state for
  these customers?

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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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Which Customers Will Be Eligible for Choice in
2002?

• Customers currently served by the following
  investor-owned utilities will be able to
  participate in retail choice
• American Electric Power (CPL, WTU, and SWEPCO)
• Entergy
• Reliant Energy HLP
• Texas-New Mexico Power Co.
• TXU
• Xcel Energy (SPS)

• El Paso Electric Co. customers will be able to
  choose in 2005.
• Electric cooperative customers will not be able
  to choose unless their boards vote to opt-in.
• Customers of municipally-owned utilities will not
  be able to choose unless the governing body of
  their utility votes to opt-in.

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Pilot Project The Beginning

• On June 1, 2001,
• 5 of most investor-owned utilities load
  (allocated by customer class residential,
  commercial, industrial)
• will be eligible for choice.
• Residential customers will sign up
• on a first-come, first-served basis.

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Customer Education Plan

• The Texas Electric Choice Act (Senate Bill 7)
  called for the PUC to create a customer education
  plan.
• Burson-Marsteller will assist the PUC in
  conducting the 11.5 million campaign beginning
  next year. The PUC expects to spend another 24
  million in the following two years to educate
  Texans about electric choice.
• Based on the current plan, educational mailings
  will begin in mid-March of 2001 to educate people
  about the pilot project.

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Examples of How Three Families Living in IOU
Service Areas Opened to Electric Choice Might
Choose Their Electric Providers
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Family A Chooses Not To Choose

• Family A is happy with its current provider the
  family sees no reason to change. It will
• Continue to receive electric service from the REP
  affiliated with its current provider
• Receive service at the price-to-beat
• Later, Family A decides to change to a new
  provider. The family can still go back to the
  affiliated REP at any time and for the first five
  years after competition begins also can receive
  service from the affiliated REP at the
  price-to-beat.

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Family BChooses A New Provider

• By watching TV, reading the mail, and talking
  with neighbors, Family B learns about new retail
  electric providers.
• Family B weighs the options price, service,
  products, convenience, and reputation and
  chooses a new REP.
• And, like Family A, if Family B becomes unhappy
  with its choice, the family can choose another
  provider or return to the REP affiliated with its
  pre-choice provider at the price-to-beat.

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Family C Chooses to Buy Power Through an
Aggregator

• An aggregator pulls together the loads of various
  customers and negotiates with REPs to provide
  customers with electric service tailored to their
  customers needs.
• Family C decides to allow its homeowner
  association, which has been approved by the PUC
  to be an aggregator, to negotiate its service,
  price, and terms with a REP.
• If Family C is unhappy with its choice, the
  family can choose another provider, another
  aggregator, or return to the REP affiliated with
  its pre-choice provider at the price-to-beat.

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Customer Protections

• Certification of REPs and aggregators
• Provider of Last Resort (POLR)
• Customer discrimination prohibited
• No slamming or cramming
• Customer information confidentiality
• No-Call List

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Low-Income Provisions

• Low-income customers will receive a reduced rate
  of 10 off a standard service package.
• If sufficient funds exist, the PUC can authorize
  a reduced rate up to 20 off the standard service
  package.
• Customers can be enrolled for low-income
  assistance if they are eligible for certain Texas
  Department of Human Services or certain other
  state-funded programs.

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More Basics

• Customers will receive a single bill from their
  REP that includes all costs related to electric
  service.
• Customers can call a toll-free number with
  questions or comments or to report service
  problems.

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Questions and Answers