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Lubbock is joining ERCOT: the long history of how this came to be

  • Feb 19, 2021
Lubbock Avalanche-Journal

The recent winter storm has brought attention to Lubbock's ongoing quest to join Texas' own electric grid, and it's not positive attention.

The Electric Reliability Council of Texas (ERCOT) grid was unable to accommodate the high usage combined with the stretch of freezing temperatures across Texas this week. ERCOT, a nonprofit that manages the grid used by about 90% of the state, has come under fire as an estimated 4 million residents were without power overnight. Many residents are still without power.

Gov. Greg Abbott, who himself has faced criticism for the state's lack of preparedness for the forecast cold front, just declared ERCOT reform an emergency item this session.

Lubbock is among the roughly 10% of the state not on the grid, but that'll soon change.

'This is Lubbock's future'

Since 2015, city utility Lubbock Power & Light has been investing hundreds of millions of dollars to connect to the ERCOT grid. In recent years, LP&L has upgraded the transmission lines across the city, along with building large transmission lines in the area to connect Lubbock to the rest of the ERCOT grid. The smart meters LP&L has been installing have been in preparation of ERCOT, as is the revamped new billing system.

Connecting to ERCOT was the answer to what used to be called Lubbock's "2019 decision." Lubbock's 15-year wholesale contract with Xcel Energy that began in 2004 was set to expire in 2019, and LP&L was seeking a power source.

What took place during the quest to find a new power source was a low point in the history of LP&L. The former director of LP&L was accused of bid rigging, the city council removed and replaced many members of the Electric Utility Board - the board that oversees LP&L - and there were several rounds of Requests for Quotation to seek a solution. At one point those RFQ's were kept in a room where only a few people were allowed to enter at a given time in an attempt to prevent information from leaking.

Electric Utility Board meetings were tense, and closed executive sessions lasted hours.

During the process, former director of LP&L, Gary Zheng, was accused of bid rigging. He was later terminated from his position after several months of being placed on paid leave. A report from hired investigators claimed Zheng emailed a consultant, a former longtime employee of Xcel, regarding the request for proposals the board was sending out in its quest to replace Xcel Energy once the contract ends in 2019. It was later discovered the consultant - who responded with an altered version of the RFP - worked for the company LP&L ultimately recommended for the contract.

One of the options at the time, which was maybe the leading option, was for Lubbock to build its own power plant. Another option was to simply enter into a new wholesale contract. The Lubbock-Avalanche-Journal was told in 2014 that the price for wholesale power was going up.

“They have told us that we probably won’t like the price, and our customers won’t like the price,” former LP&L spokesman Chris Sims said.

There was pressure for LP&L to find a solution, and find it quickly. After a new round of bidding, the decision was to join ERCOT, which Lubbock had opted out of decades before.

The announcement triggered criticism from Xcel, who said the move would require a costly and “massive infrastructure investment” that would increase costs for consumers.

There were also concerns raised at the time about ERCOT's capacity. "Especially since (ERCOT) set an all-time record for hourly demand earlier this summer, something that prompted the governor of Texas to call for conservation," the A-J wrote in 2015.

The move was hailed as a win for consumers.

“This has been a roller-coaster ride, but it’s been a great ride,” then-Mayor Glen Robertson said in 2015. “Where we arrived today is worth everything we’ve gone through. This is huge. This is Lubbock’s future.”

A brief, two-year contract with Xcel Energy pushed the deadline to June 1, 2021, and that's where Lubbock is now - set to join ERCOT (for the most part) when the more recent contract with Xcel expires.

Not all of the city will join ERCOT right away. When LP&L’s wholesale contract with Xcel Energy ends, two new agreements for almost a third of Lubbock’s electricity needs still with the Southwest Power Pool will begin.

In 2010, LP&L signed an agreement to acquire capacity and energy through a 170-megawatt partial-requirements wholesale contract for 25 years with SPP, and a 100-megawatt wind contract through Lubbock’s membership with West Texas Municipal Power Agency over 10 years when the wholesale contract ended in 2019.

Lubbock has an anticipated peak demand of around 626 megawatts, so LP&L is joining ERCOT in 2021 for the remaining megawatts needed.

That means on June 1, of 2021, about two-thirds of the city’s power would come from the ERCOT grid, and one-third still from the Southwest Power Pool.

LP&L has previously said it will not allow some customers to shop the open electric market on ERCOT while others are still receiving power from SPP, so it could be years down the road before Lubbock customers are actually shopping for electricity on the ERCOT market.

The plans to join ERCOT have pushed forward since the announcement in 2015. For four straight years, LP&L increased its base rate for capital improvement projects for the switch to ERCOT. The rate increases began immediately after LP&L announced its plans to join ERCOT, and needed to invest a projected "$333 million worth of capital improvements LP&L plans in the next six years, largely in preparation for the switch to ERCOT in 2019 when the city’s wholesale contract with Xcel Energy expires," according to a previous article in the Avalanche-Journal.

LP&L lobbied in Austin for approval from the Public Utility Commission to join ERCOT, and after a detailed cost-benefit analysis was presented, LP&L's request to join ERCOT was granted in 2018.

On Tuesday afternoon during a press conference about the city's response to the winter storm, Mayor Dan Pope was asked whether or not Lubbock still intends to join ERCOT. Lubbock will be without power if it doesn't join ERCOT later this summer when its contracts with Xcel expire, and Lubbock has invested hundreds of millions on infrastructure for the plan that was decided five years ago.

"We still plan to join ERCOT later this year," Pope said Tuesday. "It's a path that we've been on as Lubbock Power & Light and the City of Lubbock since 2015. Neither ERCOT or the Southwest Power Pool, the two electric grids that the state of Texas relies on, have performed as expected during this winter storm.

"Like many Texans, I have questions and concerns that I feel need to be answered," Pope continued. "I applaud Governor Abbot and (Texas House Speaker Dade Phelan) for getting that started today. We will have time to dig into that after this storm."

The decision to join ERCOT came before Pope's time as mayor, but in 2018, Mayor Pope filed a testimony to the PUC saying the city still intended to pursue allowing customer choice for electric customers currently serviced by LP&L.

“One of the most common requests that I receive from the citizens of Lubbock is to bring back competition for retail electric service,” Pope wrote in his public testimony. “As Mayor of Lubbock, it is my responsibility to be responsive to the needs of our citizens. Personally, I believe in the principles of competition, and there is no question in my mind that the citizens of Lubbock desire to be given the right to freely shop the Texas retail electric market for a provider.”

Further to that point, the city council unanimously approved a motion in 2018 expressing its intent to provide customer choice for electricity — should Lubbock join the Electric Reliability Council of Texas.

The reasons Texas controls its own grid, according to a Texplainer story from the Texas Tribune in 2011, is to avoid federal interference.

"By eschewing transmission across state lines, the Texas utilities retained freedom," Richard D. Cudahy wrote in a 1995 article, "The Second Battle of the Alamo: The Midnight Connection.” "This policy of isolation avoided regulation by the newly created Federal Power Commission, whose jurisdiction was limited to utilities operating in interstate commerce."

When it was announced that LP&L would seek to join ERCOT, representatives of LP&L said the move would be beneficial in several ways: saving an estimated $20 million a yearff because there's no capacity fees, eliminating the need to build an expensive power plant, giving LP&L the option to shop in a closer market and giving LP&L a more diverse energy portfolio from Texas-based power sources.

Recent events have raised the question of how reliable the unregulated market is. When the future of ERCOT gets discussed, Lubbock will need to be a part of those discussions, because after June, Lubbock will be on the grid with most of the state.

This article originally appeared on Lubbock Avalanche-Journal: Lubbock is joining ERCOT: the long history of how this came to be


(c)2021 the Lubbock Avalanche-Journal (Lubbock, Texas)

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