Lubbock Power & Light discusses distribution charges after switch to retail market

LP&L is expected to send its last bill to customers this fall after the remaining customers are switched to the ERCOT grid in May.
Published: Mar. 21, 2023 at 8:21 PM CDT|Updated: Mar. 21, 2023 at 10:24 PM CDT
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LUBBOCK, Texas (KCBD) - The Lubbock City Council heard from Lubbock Power & Light management staff Tuesday about its rates that will take electric customers to the Fall of 2023 and the distribution rates it will charge after the transition to the retail electric market.

“You will probably see some moderation of these rates as we go through space and time,” Director of Electric Utilities Joel Ivy told the council. “For now, this is going to get us into the market and get the party started, so to speak.”

LP&L is expected to send its last bill to customers this fall after the remaining customers are switched to the ERCOT grid in May and customers choose a new electric provider in the summer. LP&L will then become a “wires company,” which will be in charge of Lubbock’s electric infrastructure and distributing the power.

“As we transition to the retail market, LP&L only controls the delivery portion of the bill, not not the energy portion of the bill, which is approximately two-thirds of a customer bill,” Joe Jimenez, Financial Planning & Analysis for LP&L, told the council. “That’s the actual energy that’s delivered to their house, which is pretty much natural gas-driven pricing.”

The delivery charges will be included on the bill a customer gets from their new provider. The council was presented with an example of charges to a residential customer on a bill who uses 1,000 kWh, which resulted in a $64 bill. That included charges for the meter, which LP&L will still own, the energy delivery rate, a franchise fee, and a transition charge.

“What we mean by those transition charges are really two things,” CFO Harvey Hall said. “We’re going to have the debt service from our [Southwestern Public Service] partial requirement settlement, that’s going to be occurring later this year, in the summer, that cost as well as an existing purchase power agreement that we’re working on right now with a wind project, that’s about a $17 million a year burden that carries with us. When we compare that to the other investor-owned utilities, they don’t have that burden. They’ve been in this since 2002. Any transition costs that they have are largely all gone. We do have a little bit of a burden that we need to carry as a utility that others don’t. The second burden that we carry is the hold harmless payment. We had a $110 million agreement to go into ERCOT. It was $110 million spent over five years or $22 million a year. That’s an additional burden that we carry that will be lifted in January 2027.”

Hall said those rates could change as those burdens are no longer carried.

“Eventually these temporary things go away,” Hall said. “When we do, we’ll swing right back to the middle of the market. We’re still within the market. We’re probably on the upper end but those debt burdens will come off.”

Rates have not been set. Tuesday’s discussion was during a work session of the Lubbock City Council. A final decision on the rates is expected to be on April 11 if they receive approval from the Electric Utility Board.

To learn more about the transition to retail electric competition, click here.