The (soon to be revised) history of electric competition in Lubbock

Michael Giberson

The city of Lubbock Texas has had two competing electric power companies since 1917.  If a just announced deal goes through, competition will be eliminated.

The new “official story” is that competition produced inefficiency, but this view is in stark contrast to old “official story” as told in the “The History of Lubbock Power & Light” posted on the LP&L website.  That historical review makes the case that competition has been a good thing for the city.

Here’s the first paragraph from the historical review, with some emphasis added:

In the electric utility industry, retail competition for electric customers is a relatively new concept. Not so in Lubbock, Texas. The good people of Lubbock have benefited from retail competition for electricity since 1916.

The short version of the story is that city officials were unhappy with an early electric utility supplying Lubbock, so started a municipal utility to provide more reliable service and reasonable rates.  The private utility tried to sell its distribution system to the city at the time, but the city refused to buy it.  (Various dates are mentioned here: 1916, 1917, and, below, 1942.  See a note below explaining these dates.)

According to the existing LP&L history, competition began paying off right away:

The effort by those early Lubbock leaders was realized a success on September 28, 1917 as the municipal power plant began producing electricity priced at only ten cents a kilowatt-hour. The other utility cut its rates accordingly soon after. Imagine that!

The private utility had been charging 20 cents per kilowatt-hour and under pressure from the city had previously only reduced its rates a few pennies.  Competition brought down rates.

Today, the vast majority of Lubbock remains dual-certified and customers still have a choice of electric utility providers. Customers whose account balances are current are allowed to switch from one company to the other at their discretion. The competition for the electric dollar in Lubbock has resulted in some of the lowest electricity costs in the state of Texas and in the nation. Another major benefit of competition is that customers enjoy increased levels of customer service than would be found in cities this size with only one electric provider.

Lubbock Power & Light’s mission is to provide low cost, reliable electric service. We feel we’ve been successful in that mission. All electric customers in Lubbock have benefited from the decision of those early pioneers to begin retail competition.

I’m guessing the official story is about to change. These remarks clearly may be seen as inconvenient given the recent agreement between LP&L and Xcel. (As mentioned here earlier, the municipal utility has agreed to acquire Xcel’s distribution assets in the city and take over retail power service to current Xcel customers.)

The new story, as explained in the LP&L news release :

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.

Here is the viewpoint from the Xcel representative, also in the LP&L news release:

“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, an Xcel Energy company.

Lubbock’s mayor, also from the LP&L news release:

“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.

Some questions based on the LP&L history:

  • If the duplication of facilities has not been efficient, why did rates drop in 1917 after a duplicate system was built?
  • If this system is inefficient, why is it that electric rates are comparable to other systems in the area and relatively low compared to elsewhere in the state?
  • If the existing system is inefficient, and the new system is better, they why isn’t LP&L promising to lower rates after the wasteful, duplicative system are consolidated? Are they planning to reduce costs and not pass the savings along to consumers?

According to the now inconvenient history on the LP&L website, a “major benefit of competition is that customers enjoy increased levels of customer service than would be found in cities this size with only one electric provider.”

If this deal goes through, we will become one of the “cities this size with only one electric provider.” LP&L’s message is that we should expect customer service to suffer if the deal goes through.

NOTES ON DATES: The decision to start the utility was made in December 1916, but the system didn’t go into service until September 1917.  The “1942” reference above is to the date that Southwestern Public Service bought the Lubbock distribution utility from Texas New Mexico Utilities. Southwestern Public Service is now a unit of Xcel Energy.  TNMU was a successor company to the private utility that the city was unhappy with in 1916/1917.


2 thoughts on “The (soon to be revised) history of electric competition in Lubbock

  1. Two sets of wires is clearly inefficient, but the historical case you lay out here seems to imply that regulated or publicly owned monopoly, as practiced in the rest of the country, is even more inefficient. Not that the monopolists are likely to say so.

  2. Theoretically, and as usual radically oversimplifying, monopoly gives static efficiency (cough cough) at the cost of dynamic inefficiency, while duopoly gains some dynamic efficiency at the cost of static inefficiencies.

    And then, if two sets of wires are inefficient, is multiple sets of cell phone infrastructure also inefficient? Should we just have one set?

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