Lubbock Power & Light has struck deals with the electric market it’s trying to join and the market it’s trying to leave — moves that have been encouraged by the Public Utilty Commission ahead of a final vote.
That final vote may come as soon as Thursday, Feb. 15.
LP&L is applying to join the Electric Reliability Council of Texas after its wholesale contract in the Southwest Power Pool ends in 2021. Representatives from Lubbock’s municipal power company have said the move will be beneficial in several ways: saving millions of dollars a year due to no capacity fees, eliminating the need to build an expensive power plant, potentially creating a competitive electric market in Lubbock,and giving customers the ability to shop a more diverse energy portfolio.
Texas’ three-member Public Utility Commission will vote on whether Lubbock’s city-owned electric provider can disconnect from the Southwest Power Pool and connect to the ERCOT system. There’s been written testimony and public comments from both sides.
ERCOT and SPP have expressed concerns for the customers, and LP&L reached an agreement with both.
LP&L already announced it has agreed to pay ERCOT $110 million for infrastructure needed to connect Lubbock to the state’s grid. LP&L officials said they agreed in principal to pay $22 million per year for five years, totalling $110 million, to help mitigate some of ERCOT’S concerns over the cost their customers would incur from the estimated $360 million for transmission lines to connect Lubbock.
Upon integration, LP&L officials announced on Thursday that they’ve agreed to make a one-time payment of $24 million to SPS, or Xcel Energy.
This “make-whole payment” was brought up often during the hearing in front of the PUC last month — representatives of SPP argued that LP&L customers should also be paying for any infrastructure costs they lose by Lubbock leaving.
“The agreement reached by LP&L, and the interested parties in the ERCOT and SPP system sets Lubbock on the best possible path forward that saves their ratepayers money and opens the door to retail electric competition in Lubbock,” LP&L wrote in a news release.
These stipulations were approved by the Lubbock City Council on Thursday, and they will now be presented to the PUC at its meeting on Feb. 15 when the commission will again deliberate Lubbock’s request for integration.
Mayor Dan Pope asked during the council meeting if this move is still beneficial, even with these payments. LP&L has not publicly discussed specific cost-saving numbers, but LP&L’s chief financial officer Andy Burcham told the council that even with these costs added onto their yearly operating budget, there will still be a net savings for joining ERCOT.
Burcham reminded the council that there is a significant cost falling off due to the removal of the capacity charge in SPP, lower energy prices and lower transmission costs.
“Council members are confident that even with two sets of payments in the stipulations, the transition into ERCOT will result in cost savings for affected LP&L customers,” the city wrote in a press release. “The Council is pleased with the successful negotiations represented in the agreed upon stipulations.”