Bid to expand Texas power grid fuels angst among big electric users
Large manufacturers and industrial companies across the state are warily monitoring a utility plan in West Texas that could increase their electricity bills but potentially result in a more robust power grid.
Lubbock, famous as the birthplace of Buddy Holly and home to Texas Tech University, wants to transfer most customers of its municipal electric utility from the transmission grid currently serving the city to the Electric Reliability Council of Texas, known as ERCOT — the state’s main grid that manages the flow of about 90 percent of power in Texas.
If state regulators approve, Lubbock — with a population of about 250,000 — would become the largest city to join ERCOT since Texas lawmakers restructured the electric market in 1999. El Paso, Amarillo and Beaumont would be the biggest Texas cities remaining outside its boundaries.
But a price tag potentially in the hundreds of millions of dollars to move the bulk of Lubbock’s electricity demand from its existing grid, called the Southwest Power Pool, and connect it to ERCOT through new transmission lines is raising concerns because those costs could be spread among existing customers of both grids.
The change would likely take place in 2021 if given a green light by the Public Utility Commission of Texas, which oversees ERCOT and has scheduled a Jan. 17-18 public hearing on the issue.
“Our major member companies pay electric bills sometimes in the millions of dollars a month, so even small changes in rates have to be watched very closely,” said Tony Bennett, president of the Texas Association of Manufacturers. “Even pennies added to (electric) rates can dramatically change affordability for their power.”
A partner organization of Bennett’s group, called Texas Industrial Energy Consumers, has formally weighed in on Lubbock’s bid, saying it doesn’t oppose the move as long as Lubbock agrees to a “hold harmless” provision guaranteeing for a period of five years that Texas electricity customers won’t foot the bill for higher transmission costs resulting from it.
The price of such a guarantee could be steep, however.
Xcel Energy, a member of the Southwest Power Pool and the current supplier of much of Lubbock’s electricity, wants the city to pay $165 million to offset the cost of transmission investments it has made to serve Lubbock customers. Otherwise, Xcel contends it will be forced to pass those costs on to remaining customers in Texas and New Mexico served by its Southwestern Public Service subsidiary if Lubbock leaves.
“These are costs that can be directly tied to serving Lubbock,” said Wes Reeves, an Xcel spokesman. “All our transmission planning for a number of years has been made with Lubbock in mind.”
ERCOT, meanwhile, has pegged the price of building new transmission lines to connect Lubbock at about $364 million, although it has noted that the figure could be lower if completed as part of an unrelated transmission improvement project that’s under review but hasn’t been approved.
Lubbock officials dispute Xcel’s contention that it should pay an “exit fee” to leave its existing grid, saying the remaining customers actually will benefit through reduced costs for power generation, lower transmission congestion and other factors. In addition, Lubbock has submitted a study to the Public Utility Commission indicating that the increase ERCOT customers would see on their monthly bills if its entry is approved would amount to no more than about two-tenths of a percentage point in most cases.
Regardless, the city’s bid recently picked up a significant endorsement when Pat Wood III — a former chairman of the Federal Energy Regulatory Commission as well as the state’s Public Utility Commission — came out in favor of it. In written testimony submitted to the commission, Wood noted that costs of expanding ERCOT’s transmission grid have traditionally been spread throughout the system in order to lower barriers to entry for new power plants and other forms of economic development.
“The success of the ERCOT wholesale market should be expanded to as many Texans as possible,” Wood said in his testimony. “That success is a key part of the state’s economic development, and the (Public Utility Commission) has always been a key driver in economic development.”