LP&L officially applies to join ERCOT; vote to happen in first quarter of 2018

By: MATT DOTRAY |

Lubbock Power &Light has submitted its formal application to join the Electric Reliability Council of Texas, or ERCOT.

The application was submitted to Texas’ Public Utility Commission, which will ultimately vote on whether Lubbock’s city-owned electric provider can disconnect from the Southwest Power Pool and connect to the ERCOT system. This vote could happen as soon as in the first quarter of 2018.

Lubbock’s wholesale contract with Xcel Energy expires in 2019, and it was in late 2015 that LP&L announced its intent to join the ERCOT system once that expires. Since that announcement, both LP&L and ERCOT have completed and submitted transition studies showing the ways the city could connect to the market. Last year the PUC requested a cost-benefit analysis be completed by ERCOT and SPP. LP&L did a cost-benefit study as well, and those have all now been completed.

With the application now submitted, LP&L says it’s entering into the approval process.

“LP&L is excited as we begin the formal approval stages of this project,” said David McCalla, LP&L director. “With the benefit of the studies we have performed, we feel as confident as ever that this move will achieve our stated goals and benefit the state of Texas as a whole.”

In March, LP&L entered into a “transitional contract” with SPP for an additional 400 megawatts until 2021. This extra power puts Lubbock over its needed peak capacity of 626 megawatts until 2021, meaning if the city gets approved to join ERCOT it won’t need to hook up until 2021.

When it was announced that LP&L would seek to join ERCOT, representatives of the municipal power company said the move would be beneficial in several ways: saving an estimated $20 million a year because there’s no capacity fees, eliminating the need to build an expensive power plant, giving LP&L the option to shop in a closer market and giving LP&L a more diverse energy portfolio from Texas-based power sources.

The Southwest Power Pool has argued from the beginning it believes the move will increase electricity costs for customers of ERCOT and for cities served by Xcel.

“If Lubbock leaves the system, Lubbock’s portion of the annual costs of these investments will be added to the costs Xcel Energy customers in Texas and New Mexico already pay. And connecting Lubbock to ERCOT will require a massive infrastructure investment that duplicates facilities already in place to serve the city’s needs, creating additional costs for ERCOT customers as well,” Xcel wrote in a statement when LP&L announced its intent to join ERCOT.

McCalla said LP&L’s cost-benefit analysis shows that SPP customers will see savings from reduced production costs and reduced locational marginal pricing. On the ERCOT side, McCalla said the benefits will be more long term with a large customer out in West Texas benefiting from the nearby production and the added load production Lubbock will also be adding.

McCalla said these are topics the PUC will be considering when it takes a vote — the impact to customers as well as the impact to the system.

From now until the vote, Andy Burcham, LP&L’s chief financial officer, said there will be different types of testimony, public comment and discovery. McCalla said LP&L will get information and data requests, as will the other entities. McCalla likened the process to a court case.

The PUC is also seeking comment from Lubbock residents. LP&L this past week sent out postcard notifications to its customers alerting them to the filing of the application. The letter provides phone numbers and addresses for persons wishing to comment on the proceedings. The latest information will also be put on LP&L’s website, lpandl.com.

“This is an important moment in Lubbock’s history,” Lubbock Mayor Dan Pope said in a news release. “We are securing the resources needed to sustain the economic vitality of our city for years to come. I am proud of the work undertaken by leadership at LP&L, and as we move into the final stages of this process, I believe that all involved will see the benefit of allowing Lubbock to join our fellow Texans.”

LP&L officially applies to join ERCOT; vote to happen in first quarter of 2018