Xcel Asks for $90M ‘Switching Fee’ If Lubbock Utility Joins ERCOT

Xcel Energy – which provides electricity to 261, 896 customers in its Texas service area –filed with the Federal Energy Regulatory Commission (FERC) on May 24, requesting approval of a one-time $88.7 million interconnection switching fee, if Lubbock Power & Light (LP&L) disconnects from Xcel’s transmission system to interconnect a portion of the city’s system with the Electric Reliability Council of Texas (ERCOT).

Last September, the LP&L Electric Utility Board joined with the Lubbock City Council to announce that the electric utility would seek entry to ERCOT. The announcement came after a year of comprehensive study by LP&L regarding the path forward beyond the June 2019 expiration of the utility’s current power contract.

Joining ERCOT, LP&L said, would offer a number of advantages – among them, delivering more affordable power by:

• Eliminating the need to build an expensive power plant with estimated costs ranging from $350 to $700 million;
• Providing access to 550 generation units and more than 1,100 active market participants that generate, move, buy, sell or use wholesale electricity;
• Allowing LP&L to buy the most cost-effective power from the grid; and
• Reducing the utility’s wholesale power costs by eliminating expensive fixed-capacity charges.

The fee Xcel is requesting, company spokesperson Wes Reeves told the local Lubbock Avalanche-Journal, is designed cover the cost of transmission infrastructure Xcel has constructed since the 1980s to deliver wholesale power to LP&L, Lubbock’s municipal power company.

In a news release, Xcel officials said: “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.”

“What we’re trying to do with this fee is cushion that blow, so customers don’t see that impact,” Reeves said. “For us, it’s a matter of fairness to our existing customers so they’re not saddled with higher costs.”

However, Matt Rose, a spokesman for LP&L, told the news outlet that the utility currently pays a transmission rate to Xcel that covers the cost of these types of investments.

Indeed, LP&L asserted in a public statement that the current power contract under which LP&L is operating expires in May 2019, and on that date LP&L will have fully honored all contractual obligations set forth under the power contract with Xcel Energy. Rose said LP&L will thoroughly vet and research the filing to argue against it.

Xcel has asked FERC to act on the filing by September.