On September 1, 2017, after two years of extensive studies conducted by multiple stakeholders, Lubbock Power & Light (“LP&L”) submitted its formal application to the Public Utility Commission of Texas (“PUCT”) requesting to leave the Southwest Power Pool (“SPP”) and join the Electric Reliability Council of Texas (“ERCOT”). Because the City of Lubbock is one of the largest municipalities ever to leave another power region and attempt to join ERCOT, the transition has been an important topic in Texas since its introduction in 2015.
Due to the magnitude of the transition the interested parties have spent the past two years conducting in-depth research to determine how LP&L’s entry into the ERCOT power market will impact ERCOT, SPP, and Texas ratepayers. In 2016 the PUCT requested that a cost-benefit analysis be completed by both ERCOT and SPP in Project No. 45633. ERCOT’s integration study revealed that the estimated capital cost for transmission facilities necessary for the transition is $364 Million and that the annual average load weighted locational marginal price for ERCOT customers would increase from $35.25 to $35.28 in 2020 and from $44.61 to $44.66 in 2025. SPP’s integration study concluded that LP&L’s proposed disconnection is believed to result in roughly $5 Million of incremental costs from new transmission upgrades and $987,000 of savings from avoided transmission upgrades that result in net costs of approximately $4 Million. LP&L also engaged PWR Solutions to perform its own cost-benefit study as well and found preferred integration option costs ranging between $269 Million and $336 Million.
LP&L believes that the move to ERCOT will allow it to provide more affordable power to its customers, diversify its energy portfolio using Texas-based resources, and simplify the regulatory environment by avoiding Federal Energy Regulatory Commission oversight. Consumers are of course focused on any potential rate increase that might result from the transition. Xcel Energy, which is currently under a wholesale contract with the City of Lubbock that expires on June 1, 2019, believes the move will increase electricity costs both for ERCOT customers and for cities serviced by Xcel. LP&L takes the position that the move to ERCOT will actually save money by displacing the need to build a new generation unit that would cost between $350 to $700 Million, creating new revenue streams through PUCT-approved network transmission service rates, and saving millions of dollars a year in wholesale power costs by avoiding capacity charges.
A pre-hearing conference was held on October 9, 2017, at which motions to intervene were granted to several transmission service providers including: Sharyland Utilities, L.P., AEP Texas, Inc., and Wind Energy Transmission Texas, LLC.
A procedural schedule was adopted on October 20, 2017. Under that schedule the next milestone in the case is November 28, 2017, when all intervenor direct testimony is due. The hearing on the merits is set for January 17-18, 2018. Husch Blackwell will continue to track the progress of this transition and provide updates. More information can be located in PUCT Docket No. 47576.