Topics

Renewable Energy

Electricity prices and retail competition

TXU Acquisition

Legislative Session

Texas Renewable Energy Program

1999 legislation introduced retail competition

Renewable issues

– Renewable energy goal of 2,000 MW of new renewables by 2009

– Market-based mechanism to support efficient deployment: Renewable Energy Credits

Renewable Energy Credits

Generators

Generators earn RECs for production

Customers

Retailers required to retire RECs and may retire them to validate green products

REP

Retailers

Retailers buy power and RECs

Renewable CapacityGoal

2003 400 mw

2005 850 mw

2007 1400 mw

Actual

2003 990 mw

2005 1190 mw

Today 3000 mw

Capacity is expected to reach 4800 mw by the end of 2007.

Renewable Legislation 2005

New renewable energy goal– 5000 MW by 2015

Renewable targets– 10,000 MW by 2025– 500 MW of non-wind by 2015

Competitive Renewable Energy Zones– Facilitate development of

additional renewables that require transmission

Competitive Renewable Energy Zones

Coordinate transmission and generation development

Designate renewable energy zones Develop transmission plan Expedite licensing of transmission Consider level of financial commitment

in designating zone and licensing transmission

Popular Wind Areas

Panhandle

McCamey

Central

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Whh

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$/M

Mbtu

average price to beat

average lowest competitive offer

average competitive offer

12-month forward gas price*

Natural Gas Prices and Electric Prices in the Competitive Market

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5%

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TXU ED Centerpoint AEP Central

AEP North TNMP Total

Residential Customer Switching

TXU Acquisition KKR and Texas Pacific announced

acquisition of TXU Corp. TXU is holding company that owns

generation company, electric utility, and retail electric provider

Parties are required to give notice to PUC, which determines whether acquisition is in public interest

Legislators have expressed concerns about gouging retail customers and TXU’s concentration in generation sector

TXU Acquisition Legislation

– PUC authority to approve or disapprove acquisition

– Requirement to divest generation PUC proposed rules

– Utility must provide 6 months notice of transaction

– Retail provider must demonstrate higher level of financial capacity

PUC initiated rate review

Legislative Issues Price levels for retail customers Concentration in generation

sector Discount program for low-income

customers Adequacy of generation to meet

growth in demand Emissions from projected coal

plants