Who's Who in the Texas Electricity Market Pt. 2

TDSP stands for Transmission/Distribution Service Provider. That probably doesn’t mean all that much to the average Texan, although I’d wager it’s only the term that is unfamiliar, and not actually the companies themselves. But first, let’s take a quick look at what a TDSP is exactly, and what their role is in energy service after Texas became deregulated.

History of the TDSP in Texas Electricity

When the state of Texas deregulated, it forced the incumbent companies (like Reliant, TXU, etc) to break up into different pieces. Before the electric companies provided full scale electricity service, which included maintenance of the electricity infrastructure and getting electricity from the plants to the customers, from start to finish (with a few exceptions). When the state of Texas deregulated, that practice made way for individual Retail Electricity Providers (REPs). At this point, it became a conflict of interest for the already existing former Incumbents to retain ownership of their own Transmission and Distribution systems, as it would create an obvious competitive advantage for the bigger and already established companies.

At the same time, it was also illogical and unreasonable to expect smaller and newly created REP’s to have to build and create their own infrastructure for delivering electricity to their customers. One, it would create excessive redundancy that would be expensive and serve no purpose, and two, the amount of money it would take to construct an infrastructure from scratch would act as immediate barriers of entry for new companies, defeating the entire purpose of deregulation in the first place.

The Difference between a TDSP and the REP

The TDSP, as already mentioned, maintain the infrastructure for electricity transmission or distribution. The names you probably recognize include Centerpoint (split from Reliant), Oncor (Splint from TXU) Texas New Mexico Power Company, AEP North, and AEP Central. These are the TDSPs who own the power lines and come out to repair them when they go down. They’re also responsible for transmitting the electricity over those lines from the power generators and into a customer’s home. The electricity they own they sell to the REPs wholesale, and they also charge the REP’s monthly charges for the upkeep of the infrastructure.

So that is a quick overview of how the TDSPs work in the state of Texas. To use a metaphor that helps make the understanding easier, the TDSPs are like the guys who ship in all the popcorn, hot dogs, sodas and pretzels to the ballparks, which customers then walk up to counters and purchase at the concession stands. They essentially “stock the shelves” for the customers.

Power Generators in Texas Electricity

Being the leading crude-oil producing state in the U.S., Texas plays a vital role in the country's overall energy capacity. Texas not only provides a quarter of the nation's refining capacity with nearly 5 million barrels of oil processed per day, but also accounts for a quarter of total natural gas production as the nation's leading producer.

So it goes without saying that power generation companies are not few and far between in the Lone Star State.

What is a Texas Power Generator?

Power generators or power generation companies use natural gas, coal, wind, nuclear, biomass and hydro to produce the power that Texas businesses, residents and commercial facilities count on. Power generation companies own and operate the power plants responsible for producing energy sold on the wholesale market to Retail Electric Providers in Texas, who of course turn around and package it for the consumer.

Texas power generation companies are responsible for a vast portion of the country's energy capacity, with Texas specifically the leader in wind energy development throughout the entire U.S.

Major Texas Power Generators

There are of course numerous power generators in Texas and several subsidiaries that are responsible for generating the power placed on the grid and transmitted to homes and businesses across the state.

Here are the major players in Texas power generation:

"Luminant":http://www.luminant.com/about/default.aspx
Luminant is a subsidiary of Energy Future Holdings (EFH), formerly TXU Corp., and generates more than 16,100 megawatts (MW) of energy in Texas, including 2,300 MW of nuclear and 5,800 MW of capacity generated from coal. Luminant also happens to be the largest purchaser of clean electricity generated from wind in Texas and fifth largest in the United States.

"NRG Energy, Inc.":http://www.nrgenergy.com/index.htm
Founded in 1989, NRG currently has a capacity of more than 24,000 MW across the globe, including nearly 11,000 MW in Texas. NRG also has full or part ownership in 44 power generation plants.

"Suez Energy":http://www.suezenergyna.com/ourcompanies/energygen.shtml
Suez Energy Generation is located in the heart of energy land in Houston, Texas. Suez owns and operates 72 power, cogeneration, steam, and chilled-water facilities, with a total power capacity of more than 7,750 MW. Suez power generation facilities use various fuels to produce electricity, including renewable resources.

"Shell":http://www.shell.com/
Providing the world's first commercial gas liquification plant in 1964, Shell is one of the largest energy producers in the world, active in everything from gas-to-liquids, wind and solar energy to coal gasification technology. In addition to providing gasoline for automobiles across the country, Shell is also heavily involved in building and operating natural gas pipelines, and developing wind and solar technology.

Power generation companies are essentially the first line of a long conveyor belt that serves the Texas electricity market from generation to home and business. As the means to improve infrastructure and add additional power plants becomes available, Texas is generally at the front of the pack when it comes to producing energy in new, more ecological, efficient and abundant ways.

The Role of ERCOT in Texas

ERCOT is otherwise known as The Electricity Reliability Council of Texas. ERCOT may not affect you directly, but through its actions helps insure you safe reliable electricity for your home.

What is ERCOT?

The Electricity Council of Texas (ERCOT) is a nonprofit corporation entity under NERC/FERC, which manages the flow of electricity and power to over 22 million Texas electricity consumers. ERCOT schedules power to an electric grid that covers over 38,000 miles of Texas Electricity Transmission, equivalent to 85% of the state’s electric load. ERCOT manages 75% of the deregulated electricity market in the state. ERCOT also oversees financial settlements for the wholesale bulk-power market in Texas as well as customer switching for more than 6.5 million Texans in deregulated areas.

What Role does ERCOT play in Texas Electricity Market?

The Electricity Reliability Council of Texas (ERCOT) is overseen and regulated by The Public Utility Commission of Texas (PUCT). The PUCT aids in ERCOT performing its role in the Texas electricity market by helping manage the power grid and ensuring that market rules are in place to protect consumers.

One of ERCOT's major roles in the Texas Electricity Market is to ensure that consumers have reliable electric service. ERCOT performs this role by constantly monitoring and analyzing all power grid components every 2-4 seconds for status updates. ERCOT also directs the flow of electricity in conjunction with your local Transmission and Distribution Service Provider (TDSP) so you can have safe and reliable energy.

ERCOT also plays a huge role in the deregulated Texas Electricity Market. Now that people in Texas have the power to choose their own Retail Electric Provider (REP), ERCOT's role is to help facilitate retail registration of energy and also help the switching process fpr Texas electricity companies and their customers.

Market Process and Participants

Although ERCOT is managed and regulated by the PUCT, it is not the key reason why ERCOT is able to fulfill its roles in the Texas Electricity Market. There are four major entities that help ERCOT perform its three processes in Texas: Qualified Scheduling Entities (QSE), Resource Entities (REs), Load Serving Entities (LSE), and the Transmission and Distribution Service Providers (TDSPs).

Market Operations:
Qualified Scheduling Entities (QSE) is the key part of the market operations of ERCOTs process. QSE submits daily schedules for their bilateral transactions with total generations and demand. QSEs also place bids for ancillary service and settle financial payments with ERCOT.

Power Operations:
Resource Entities are facilities that are represented by a QSE that has been approved and capable of providing energy. Resource Entities either own or manage a generation resource or has the option to act as a Load Acting as a Resource (LaaR) that correlates with ERCOT instructions to lower electricity usage or provide ancillary service.

The Transmission and Distribution Service Providers (TDSPs) transmit and delivers the electricity to a customer’s home or business along the poles and wires. This company is responsible for maintenance and repair of these poles wires.

Commercial Operations:
Load Serving Entities (LSE) provides electrical service to retail and wholesale customers. LSE includes competitive retailers that sell electricity in Texas in a competitive market.

The Texas Electricity Market in 2009

Deregulation provides not only unique benefits to the Texas electricity consumer, but also unique structural and logistical needs in order to ensure that electricity service across the state remains safe and reliable. Moving forward into 2009, the continued growth of deregulation in the Texas electricity market only serves to increase competition and foster more opportunity for affordable and reliable electric service.

Each of the players in the Texas electricity market detailed above are essential cogs in the wheel that ensure energy is generated in an efficient and cost-effective manner, that the wholesale and retail markets are maintained with consumer protection and good business practice in mind, and that ultimately the electricity reaches its final destination in a safe and ongoing, reliable manner.