Michael Giberson
This morning, November 4, municipal utility Lubbock Power & Light and local regulated utility Xcel/Southwestern Public Service announced that the city utility will buy out the Xcel distribution system within the city and LP&L would become the monopoly retail power provider.
The press conference hosted by the city emphasized the costliness of maintaining duplicate distribution system. The announcement didn’t explain why it made more sense for LP&L to buy out Xcel than for Xcel to buy out LP&L. A press release (reproduced below) contains more details.
(Oddly, the press conference held by the city seemed mostly focused on the redevelopment of Lubbock’s downtown area. Apparently the costs of moving two sets of wires was a significant problem for the company in charge of redeveloping the downtown area; with that problem resolved the redevelopment should be cheaper to manage. Will the developer be refunding the savings to the city? As part of the deal Xcel will donate its downtown building to Texas Tech University and consolidate its activities at a southwest Lubbock location.)
One local commenter observes this will mean an end to the big advertising spending by LP&L and Xcel, to the detriment of local media companies. A radio show host said on his blog:
Good bye Xcel Energy (at least in Lubbock) and good bye competition! Today Lubbock announced it was spending $87 million dollars to buy out the Lubbock customer base of Xcel Energy. According to the city, this is great for downtown redevelopment. OK, great.Mayor Tom Martin was quick to say at the presser that your rates won’t change because of this. Really? Does anyone buy this? LP&L has no competition in Lubbock (for the most part) and we shouldn’t expect rates to change? We shouldn’t expect customer service to change?
I’m sorry but the only people who will benefit from this buy out are the people in charge at City Hall. And how about the timing? The city keeps this whole thing quiet until after the bond election.
I can imaging that I’ll have updates once more information is available.
MORE DETAILS: From the LP&L press release:
Electric Companies Move to Benefit Lubbock
(Lubbock, TX) – Representatives from Lubbock Power & Light (LP&L), Xcel Energy and the City of Lubbock made an announcement today that will lay the foundation for the future of power in Lubbock.
LP&L and Xcel Energy have reached a mutually beneficial agreement that will allow LP&L to purchase Xcel Energy’s electricity distribution system within the city and to serve all of Xcel Energy’s Lubbock retail electric customers. Since 1942 Lubbock has been served by both companies, resulting in duplication of electric power services, lines, poles and substations. Both companies have determined this to be an inefficient and intrusive way to provide electricity to the community.
“The duplication of retail electric service in Lubbock has not been efficient, and we believe we can best serve Lubbock and our other Texas retail customers by only providing the low-cost wholesale electricity to LP&L,” said David Eves, president and CEO of Southwestern Public Service (SPS), an Xcel Energy company. “Xcel Energy customers in Lubbock will be served by LP&L, but Xcel Energy will continue to supply the wholesale power and transmission services.”
Currently LP&L provides power to more than 77 percent of households in Lubbock but purchases its power wholesale from Xcel Energy.
“It’s natural for LP&L to pick-up the Xcel retail electric service, since the City of Lubbock already provides utility service to all the properties in Lubbock,” Mayor Tom Martin said.
Because LP&L will use its solid financial position and bond ratings to fund the purchase through electric revenue bonds, electric rates for their customers will remain some of the lowest in the state.
“We want all our customers to know that your electric rates will not increase as a result of this new relationship. LP&L electric customers will continue to see low electric rates,” W.R. Collier, LP&L Electric Utility Board Chairman, said.
Electric customers in the Panhandle and South Plains enjoy some of the lowest electric rates in Texas because of Xcel Energy’s low-cost power generation system and abundant renewable resources. Xcel Energy will remain a significant part of the Lubbock community and will continue its civic involvement in Lubbock as a regional hub of operations and as a wholesale electricity provider for LP&L and retail provider in other areas of the South Plains.
Xcel Energy has received approval from the Xcel Energy Board of Directors to proceed with the sale of these assets, and the company is expected to gain regulatory approvals within the next nine months. LP&L will be seeking approval from the LP&L Electric Utility Board and the Lubbock City Council.
“This decision was made in the best interest of the citizens of Lubbock as well as in the best interest of dozens of Texas and New Mexico communities where Xcel Energy will remain the sole retail provider. This will not be an immediate change, and we will do everything we can to make this transition as smooth as possible for our customers,” Eves said.
LP&L and the City were advised by RBC Capital Markets with respect to financial matters, R.W. Beck with respect to operational matters and Vinson & Elkins with respect to legal matters.
Customers with questions regarding their service are encouraged to contact their current electricity provider.
***Xcel Energy (NYSE: XEL) is a major U.S. electricity and natural gas company with regulated operations in eight Western and Midwestern states. Xcel Energy provides a comprehensive portfolio of energy-related products and services to 3.4 million electricity customers and 1.9 million natural gas customers through its regulated operating companies. Company headquarters are located in Minneapolis, with Amarillo serving as the headquarters for Xcel Energy’s regional operating company, Southwestern Public Service Company. More information is available at www.xcelenergy.com .
Lubbock Power and Light (LP&L) is the municipally owned electric utility of the City of Lubbock. LP&L provides electric service to over 70% of the electric market in Lubbock Texas and offers consolidated billing for City of Lubbock Utilities. LP&L has provided the lowest electric rates and most reliable electricity in Lubbock for more than 90 years. For more information, visit www.lpandl.com.