Lubbock or leave it: The costs of an electric divorce
A battle being fought at the federal level will place $88.7 million in infrastructure costs on either Lubbock rate-payers or the rest of Xcel’s customers as Lubbock looks to cut ties and join the Texas electric grid.
Xcel Energy has announced that it will seek $88.7 million in fees from Lubbock Power & Light for infrastructure costs as Lubbock aims to switch to the Texas grid.
A majority of Texas is on a separate electrical grid, called the Electric Reliability Council of Texas, and much of the Panhandle, including Lubbock, is connected to the Eastern grid.
“Everything since (1983) has been planned and built with Lubbock as the model. Really it’s the whole network,” said Wes Reeves, spokesman for Xcel Energy in the Texas-New Mexico region. “In the future, we have to include Lubbock as part of that mix and if you take a large user out of that, you have a lot of costs that have to be shouldered by everybody else.”
Xcel has filed a request with the Federal Energy Regulatory Commission saying that if Lubbock switches to the ERCOT grid, the rest of the area will be stuck with $13.8 million in “sunk” transmission costs per year locally, as well as $4.5 million per year regionally.
Transmission costs are the price to move power, not to generate it, Reeves said.
“When the power line is built, it has a 40-year pay out and we’re only looking at a 10-year period of costs, which is where the $88.7 million came from,” Reeves said. “After 2019, we still have a contract with Lubbock to move 30 percent of their need to them, and if they were to leave, we still need to deliver that. All of a sudden you have 70 percent of that revenue to maintain that network and serve the whole of Lubbock gone.”
For Lubbock’s part, when their contract ends in 2019, they will no longer receive the same rate they have been receiving.
After sealing a deal for Xcel to sell power to Lubbock at a “wholesale average cost rate” in 2004, Occidental Petroleum and Cap Rock filed a complaint stating that they were subsidizing the rates of Lubbock and cooperatives like Golden Spread Electric and Farmer’s Electric. The result was that wholesale average rates would end when the contracts ended.