Lubbock City Council Chooses Not to Raise Electric Rates Now, Approves LP&L Dip Into Cash Reserves
At this week’s Lubbock City Council meeting, the council approved the recommendation of the Lubbock Electric Utility Board of Directors and chose not to raise electric rates for Lubbock Power & Light customers right now, though further increases are likely later on in the year.
The council unanimously approved amending the LP&L budget to add ten new full-time positions and made several other budget modifications and purchases, most relating to the acquisition of Xcel Energy’s Lubbock operations. Many of these will be paid for out of LP&L cash reserves. City ordinance requires the utility to have $50 million cash reserves on hand, following severe financial problems experienced by LP&L, which surfaced in 2003.
The utility will spend around $4 million of cash reserves, $1.1 million originally approved for in the budget, and another $2.8 million approved by the council Tuesday.
In another agenda item, the council approved eliminating the Field Collection charge of $25 dollars, since the utility no longer collects in the field, decreased the Reconnect Charge for cuts at the pole during business hours from $150 to $115, implemented a $5 duplicate bill charge, and approved an Agreed Payment Plan Charge of $30.
The Agreed Payment Plan Charge recovers the cost of providing a payment arrangement to the customer. According to LP&L Director of System Planning Donald Cullon, prior to the Xcel Lubbock acquisition, out of roughly 70,000 customers using the utility, 15,000 individual customers made payment plans at least once annually. Mayor Tom Martin said that there were some people who were “gaming the system” by making payment plans monthly because there were no extra charges to set up a payment plan.
Cullon said that LP&L does not expect the new payment arrangement fee will generate any substantial revenue, but “we hope there will be some customers who choose to pay in full and not make a payment arrangement.” The payment arrangement fee will not be applied if done over the utility’s Integrated Voice Response system.
“The single greatest load on our call system is people making payment arrangements, so if we can reduce that call volume, it will make it a lot easier for us to service the other customers,” Cullon elaborated to the council.
The possibility of a rate increase seems likely as the summer months approach. Currently, rates are expected to increase by 11.2 percent at some point during the year, but prices on wholesale energy will not be released until the summer months. LP&L’s electric rates match Xcel Energy’s rates, which saves the Lubbock utility money by eliminating the need for studies, as well as consultant and attorney fees.
The council approved the service charge changes 6 to 1, District 1 Councilman Victor Hernandez dissenting. Hernandez favors a rate increase now, allowing for gradual rate increases to make up for the estimated 11.2 percent increase, rather than implementing the entire increase at once later on in the year.
“Well, just as a consumer, I’d rather, if we’re going to have a rate increase, have it phased in half now and half later, and it’s easier for me to absorb.”