As a regulated utility, Xcel is entitled to recoup capital costs for items built to serve the City of Lubbock market. It is possible that LP&L customers could end up paying very high fees as they will be paying for new infrastructure to connect Lubbock to the ERCOT grid and could be ordered to repay Xcel for outlays it has made. However, it wouldn’t surprise if Xcel’s decision to sell its Lubbock retail business to LP&L were to factor in this case. – Pratt
via press release
Xcel Energy seeks FERC approval to charge switching fee to LP&L
Today, Xcel Energy filed a request with the Federal Energy Regulatory Commission asking for approval of an interconnection switching fee in the event Lubbock Power & Light disconnects from the Xcel Energy transmission system and Southwest Power Pool regional power grid to interconnect a portion of the city’s system with the Electric Reliability Council of Texas. LP&L has proposed to move approximately 70 percent of its retail electric loads to ERCOT as early as June 2019.
The fee, proposed to be collected either as a one-time payment or by annual payments over a period of up to 10 years, would recover the costs of transmission infrastructure Xcel Energy has planned and constructed since the 1980s to deliver wholesale power to LP&L. The company has invested tens of millions of dollars in high-voltage transmission infrastructure, and will be investing in significant additional transmission infrastructure through 2019, in order to provide reliable transmission service to LP&L, with the reasonable expectation of collecting transmission service revenue from moving power to LP&L. If LP&L leaves the SPP regional grid, the costs of infrastructure installed to serve LP&L would be shifted to Xcel Energy’s remaining retail and wholesale customers, a move that will increase their rates unless the interconnection switching fee is implemented.
Xcel Energy requests that FERC act on the filing by September 2016. The interconnection switching fee is estimated at $88.7 million if paid as a one-time fee, based on 2015 costs. The actual amount Xcel Energy would recover through the interconnection switching fee would be determined at a future date based on costs in the final year before LP&L leaves the SPP regional grid.
LP&L responds with a press release:
LUBBOCK POWER & LIGHT STATEMENT REGARDING XCEL ENERGY FILING WITH FEDERAL ENERGY REGULATORY COMMISSION
LUBBOCK, Texas – On September 24, 2015, Lubbock Power & Light (LP&L) announced its intention to seek entry to the Electric Reliability Council of Texas (ERCOT). The announcement came after an extensive public request for proposal process (RFP) and comprehensive study by LP&L regarding the best path forward for its customers beyond the June 2019 expiration of the utility’s current full requirements power contract with Xcel Energy.
LP&L is not currently, nor has it ever been, a member of the Southwest Power Pool (SPP). LP&L is merely a customer of Minneapolis-based Xcel Energy. The current power contract under which LP&L is operating was signed in 2004 with a set expiration date of May 31, 2019. On that date, LP&L will have fully honored all contractual obligations set forth under the 2004 power contract with Xcel Energy.
The much publicized RFP process undertaken by LP&L to find a solution for long-term power in 2015 successfully solicited many proposals from both the SPP and ERCOT power markets. It is notable to mention that Xcel Energy did not participate in this process. After extensive study and review, it was determined by the LP&L Electric Utility Board and the Lubbock City Council that entry to the ERCOT market was in the best long-term interest of the LP&L ratepayers.
LP&L has engaged in a process with the Public Utility Commission of Texas (PUC) and ERCOT to thoroughly study all aspects of this proposed transition since the original announcement in September of 2015. This process is still underway and LP&L is committed to work with the PUC and ERCOT to find the best way to successfully integrate the majority of its retail electric load to ERCOT.
Seeking interconnection to the ERCOT transmission system after the expiration the current full requirements contract with Xcel Energy is a long-term decision. LP&L will vigorously defend against the filing today by Xcel Energy seeking compensation for infrastructure built to serve customers throughout its multi-state territory but at this time does not believe that Lubbock ratepayers should be responsible for investments made by Xcel Energy or its subsidiary company beyond the conclusion of the current power agreement.
Lubbock Power & Light is the third largest municipal electric utility in Texas and has been serving the citizens of Lubbock since 1917. LP&L serves more than 104,000 electric meters and owns and maintains 7,220 miles of power lines and three power plants in and around the City of Lubbock. For more information about Lubbock Power & Light, as well as updates on new customer initiatives implemented, go to www.lpandl.com and follow the utility on Facebook and Twitter.
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