City considers deregulating power market and offering choice to LP&L customers

Local News

LUBBOCK, Texas — Lubbock Power and Light presented a plan to City Council on Tuesday to deregulate utilities and invite a competitive market.

Unlike most major cities in Texas, Lubbock’s utilities are regulated and provided by a city-owned utility service. With everyone in the city set to transition to ERCOT by May 2023, Lubbock is in a unique position to change its utility model and have customers shop for their power from private providers.

“Should they go this direction, it will fundamentally change the way Lubbock gets their power,” Lubbock Power and Light spokesman Matt Rose said. “You will no longer automatically receive your power from Lubbock Power & Light. You will have to shop between about 150 plans and you’ll have to pick your provider. This allows you the opportunity to craft your power portfolio to how it best interests you, but it also comes with challenges in terms of making sure you make the right deal.”

LP&L said customers could benefit from more competitive rates, innovative rate options, and access to renewable energy options. However, they also noted drawbacks for customers.

In the retail market, customers would be responsible for choosing a decent provider, and customers’ credit issues could limit available choices. Also, the city will no longer be able to intervene for constituents if they have issues in their rates or service.

“There are people right now that are very vocal about the fact that they want to see competition come to Lubbock,” Rose said. “But there’s also a lot of folks that have lived in Lubbock their entire lives that are used to the way they received their electricity, and this is going to be a fundamental change. And like with any major migration, you are going to have pros and cons.”

A study conducted by Lubbock Power and Light found that opting in would significantly reduce the city’s purchased power risk and operating costs. Power costs in Fiscal Year 2021-2022 are estimated at $196.3 million, while costs would be reduced to $47.6 million annually in a retail market. Similarly, production costs would reduce from about $11.3 million a year to just $866,000 if the generation units are operated in the ERCOT market.

The Texas legislature directed all cities to deregulate their power supplies in 1999. That direction, however, did not apply to the state’s 72 city-owned electric utilities or the 75 electric cooperatives, such as the South Plains Electric Cooperative. Lubbock is the third-largest city in Texas to maintain a regulated utility model, behind San Antonio and Austin.

To date, none of those 147 markets have opted into the retail electric market. If the Electric Utility Board and the City Council vote to deregulate, Lubbock would be the first city in Texas to voluntarily deregulate and opt-in to the competitive market. That decision is irrevocable under law.

LP&L proposes the city vote to opt-in during the second quarter of 2022, with customers becoming active in the retail market by the end of 2023.

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