Electricity Markets

Lubbock Power & Light plans tied to ERCOT move advance

Lubbock Power & Light is expected to win final approval in March from the Public Utility Commission of Texas to move most of its system into the Electric Reliability Council of Texas, and away from the Southwest Power Pool, following a PUCT decision on Feb. 15.

Commissioners directed the PUCT staff to draft a final order formally endorsing the switch at their March 8 meeting, according to commission spokesman Mike Hoke. All parties are in agreement with the change, he said, and the March vote is seen as a formality in setting the path for a move LP&L says should save its customers millions of dollars annually by creating a competitive power market, eliminating capacity fees and the need to build new generation. LP&L’s move into ERCOT is part of its plan to provide retail electric choice for its customers.

LP&L Director David McCalla hailed the PUCT decision, saying in a statement that the utility's membership in ERCOT "accomplishes the long-term goals we set forth when we began this process over two years ago. It provides our customers a diversified portfolio of reliable and affordable Texas power for generations to come."

Lubbock Mayor Pro-Tem Latrelle Joy called the PUCT decision "a major step forward in the integration of LP&L into the ERCOT system, and we look forward to the entry of the final commission order on March 8."

The move to ERCOT will not be immediate, however, even if the PUCT gives its final blessing on the 8th as expected.

LP&L's integration into ERCOT would not be achieved until June 1, 2021, when its existing wholesale contract with SPP ends. The utility would spend the next three years preparing for the move.

LP&L submitted its application to integrate approximately 70% of its system into ERCOT on September 1, 2017. The Texas commission held a hearing in January to discuss whether the request was in the public interest of state ratepayers.

Among the hurdles LP&L had to cross was reaching agreements with ERCOT and SPP stakeholders related to the cost of Lubbock's integration. Earlier this month, the Lubbock City Council and LP&L Electric Utility Board voted unanimously to approve a stipulated agreement between LP&L and interest parties in ERCOT and SPP.

According to the terms of the agreement, LP&L will pay $22 million annually for five years to ERCOT to address concerns over the potential impact of the move on its other customers. It is expected to cost $360 million for the construction of transmission lines to connect Lubbock to ERCOT.

Upon integration, LP&L also will make a one-time payment of $24 million to Southwestern Public Service for the utility’s retail and wholesale transmission customers.

LP&L has identified several advantages it believes will be provided to Lubbock ratepayers by joining ERCOT.

They include eliminating the need to construct a presumed natural gas-fired power plant costing anywhere from $350 million to $700 million by providing access to 550 generation units and more than 1,100 active market participants that generate, move, buy, sell or use wholesale electricity.

It also gives Lubbock a diversified energy portfolio from Texas-based power plants. For instance, it provides full access to West Texas wind energy and a mix of conventional and renewable electric generation fueled by gas, coal and solar, the utility says. Texas is the leading wind energy state in the US.

LP&L is the third-largest municipal electric utility in Texas, serving more than 104,000 electric meters and owning and maintaining 4,936 miles of transmission lines and three power plants in and around Lubbock.